How did Proposition 19 hurt taxpayers?
Proposition 19, titled “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act,” was a measure on the November 2020 ballot that amended the state constitution to change the rules for how property is taxed. The measure began as an initiative sponsored by a trade group, the California Association of Realtors. That initiative was replaced by a similar measure passed by the state Legislature at the last possible moment before the deadline for the November ballot.
The measure that went before voters as Prop. 19 was Assembly Constitutional Amendment 11. It was first brought to the Legislature on June 20, 2020, as a gut-and-amend, which is a maneuver that replaces all the text of a previously introduced bill, thus evading the normal vetting process of noticed policy hearings and public comment. The new ACA 11 was passed by the Senate Elections and Constitutional Amendments Committee on June 23, passed by the Senate Appropriations Committee on June 24, passed by the Senate on June 25 and passed by the Assembly on June 26.
If the Legislature had taken more time to consider this measure and hold substantive hearings, people and the lawmakers themselves might have realized that it would have a devastating effect on families that suffer the loss of a parent and then face reassessment of family properties to full market value, losing “the Prop. 13” protection that had kept the tax bills affordable.
ACA 11, now Proposition 19, had two main elements. The first was expanded “portability” of base-year property taxes. Homeowners who are 55 years of age or older, who are victims of a wildfire, or who are disabled may now move to a replacement home anywhere in the state, of any value, and take the base-year property tax assessment of the old home with them to a new home up to three times.
Now to the other part of Proposition 19. Previously under the state constitution, property transfers between parents and children, and sometimes grandparents and grandchildren, were excluded from reassessment. These family members could transfer a home of any value and up to $1 million of assessed value of other property, such as a small business property, a vacation cabin, or a rental property, without any increase in the property tax bill. This taxpayer protection was added to the state constitution in 1986 by Proposition 58 (parents and children) and in 1996 by Proposition 193 (grandparents and grandchildren) with overwhelming public support.
Proposition 58 was approved by more than 75% of California voters, and Proposition 193 was approved by nearly the same margin. Now, these taxpayer protections are gone.
Proposition 19 has replaced 58 and 193 with a very narrow exclusion for family transfers of property. Only a principal residence that the inheriting child occupies as his or her permanent primary residence is eligible for an exclusion from reassessment. Unless the new owner can move in within one year, the property is reassessed to market value. Business properties and rental properties lose the protection entirely.
The Howard Jarvis Taxpayers Association supports expanded portability, but we strongly opposed Proposition 19 because of its harsh tax increase on intergenerational transfers of property.
HJTA is fighting to reinstate 58 and 193 for California families.