By SUSAN SHELLEY | Orange County Register | November 18, 2023
A lot of Californians do not know this, but they have lost the right they had for more than three decades to transfer family property between parents and children without any increase to the property tax bill. Now, with only narrow and limited exceptions, property passed from parent to child is reassessed to current market value, triggering a massive tax increase for long-held family properties.
This can be fixed, but there’s not much time to get it done.
It was 1986 when the parent-child exclusion from reassessment was first added to the state constitution. A growing number of Californians were angry to discover that state law treated death and inheritance as a “change of ownership” under Prop. 13, triggering reassessment to current market value just as if it was a sale. The legislature proposed a constitutional amendment that would allow parent-child transfers of a home and a limited amount of other property, such as a small business or a rental property, without reassessment.
The parent-child transfer protection passed by a unanimous vote in both houses of the legislature, and then was approved by 75% of voters statewide.
And now, it’s gone.
Proposition 19 took it away. This 2020 ballot measure, advertised heavily for the benefits it would provide to wildfire victims and seniors who wanted to move to a new home, had a surprise in the fine print—the biggest property tax increase in the history of California. Even worse, it’s a tax increase that specifically targets people who have just lost a parent.
Now property that’s transferred from parent to child is reassessed to current market value as of the date of transfer. The new property tax bill is 1% of that current market value, plus all the extra charges for various bonds, fees and parcel taxes.
This is worse than an estate tax, which California voters flatly banned in 1982. An estate tax is owed only once. Property taxes are owed every year as a condition of keeping what you already own.
The letter from the county tax assessor arrives in the mail with the sympathy cards. Even someone who moves into a parent’s home within one year can see a huge tax increase if the property is now worth more than $1 million above its assessed value.
In another unwelcome surprise, a trust offers no protection from reassessment. Assessors “look through” the trust to see the present beneficial owners.
This has been devastating to families that built a small business, bought a small apartment building, or planned to use the income from a rental home to pay the bills for a family member’s long-term care or medical needs. It’s wrecking the plans of parents in every community who have worked to get their families higher on the economic ladder by starting to build generational wealth through real estate. In places where property values have gone up significantly, which is everywhere in California, the annual salaries that people typically can earn are not enough to pay annual property taxes that start at 1% of the market value of a typical home.
Fortunately, the Howard Jarvis Taxpayers Association, where I am on staff as VP of Communications, is collecting signatures to put an initiative on the ballot that would repeal the tax increase that was hidden in Prop. 19, without touching the other provisions in it. The official petition is available at RepealTheDeathTax.com and can be downloaded and printed on one sheet of ordinary letter-size paper. This enables instant distribution of the petition throughout the state. Theoretically, a million people could download the petition at the same time, fill it out and sign it, and have one other registered voter in the household also sign it.
The tricky part is reminding everyone to send the signed petitions back to the Howard Jarvis Taxpayers Association.
In 1977, when Howard Jarvis was trying for the fifth time to get the initiative that became Proposition 13 on the ballot, he bought a month of statewide radio ads and growled, “There are a great many of you who have gotten petitions signed and they are lying on your desk or in your dresser drawer, where they are no good. If you don’t send them back to us by December second, we’re going to lose. We need them back as soon as possible so that we have time to process them.”
Jarvis wrote in his book, “I’m Mad as Hell,” that “about two weeks before the December 2 deadline, everything came together in a big way. All of a sudden the signatures started pouring in. It was an avalanche. They started coming in by the truckload.”
By the deadline, they had 1.2 million signatures to turn in to the counties and another 300,000 that they didn’t have time to count until later. “And the whole campaign had cost us only about $28,500,” he wrote.
Proposition 13 qualified for the June 1978 ballot and was approved by nearly two-thirds of voters statewide. It changed the constitution and made it possible for ordinary people to keep their property instead of being taxed out of it. Before Prop. 13, property in California was assessed at current market value and the tax rate was a statewide average of 2.67%. Prop. 13 cut the tax rate to 1% and capped increases in assessed value at 2% per year. Check HJTA’s calculator at GuessingGame.org to see what your property tax bill would be if there never was a Prop. 13.
It was a good idea then to limit increases in assessed value to 2% per year, and it’s still a good idea. What’s not a good idea is taxing families out of the property their parents worked so hard to acquire.
HJTA needs about 1.2 million signatures by January 16 to be sure the Repeal the Death Tax Act qualifies for next November’s ballot.
Now you know.
Tell a friend. And join me for the Petition Party radio show, Fridays at 6:00 p.m. on KSFO.com and on AM 560 KSFO in the Bay Area.
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Susan Shelley is Vice President of Communications for the Howard Jarvis Taxpayers Association. This column may be reprinted without charge. Please contact Susan@hjta.org.