To: California Association of Realtors
Re: Death and Taxes
Yes, all Californians eventually will die.
But why can’t our property tax discounts live forever?
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The ‘People’s Initiative to Protect Prop. 13 Savings’ reminds us of a Californian truth as undeniable as the Golden Gate Bridge: Limiting property taxes is the fundamental organizing principle of postmodern California.
That’s the question raised by your glorious new ballot initiative to make our state’s Proposition 13 property tax savings even more generous.
Your “People’s Initiative to Protect Prop. 13 Savings” reminds us of a Californian truth as undeniable as the Golden Gate Bridge: Limiting property taxes is the fundamental organizing principle of postmodern California.
Under our Prop. 13 regime, the taxable value of every California home is set at the date its owner purchased it. From that original base, a home’s assessed value cannot increase by more than two percent annually – no matter how much the market value goes up. In this way, Prop. 13 provided homeowners an ever-escalating discount on property taxes as the value of their homes rose.
This subsidy is the best-protected piece of our state’s finance system. Californians will cut school funding and raise income or sales taxes, but Prop. 13 tax savings are untouchable.
But something as fundamental as Prop. 13 can always use more protection. Your new initiative shores up a fundamental weakness: Homeowners don’t get to keep their low property taxes forever. Tragically, they lose that discounted tax assessment once they sell their property and move on to a new home.
Fortunately, your initiative would end this outrage.
Your proposal would allow anyone over 55 to sell their California house and carry those same low property taxes to their next home, no matter the new home’s market value, or its location in the state, or the number of moves they make.
Call it a new birth of freedom. Prop. 13 only protected older homeowners from being forced out of their homes by rising property taxes. Your Son-of-Prop.-13 also frees older homeowners who might feel trapped in their homes by their unwillingness to surrender those property tax savings. Your tax savings would no longer follow just your house – they’d follow you.
If your initiative passes, longtime homeowners will finally be free – to sell their homes at the huge profit they’ve run up over the years, without losing their property tax discount. Hallelujah!
(Purely coincidentally, this would create more commissions for realtors.)
I have only one concern: Your plan doesn’t go far enough.
Why limit property tax protections to just the old and living? To express the central importance of property taxes here, I propose – modestly – that every California homeowner be entitled to property tax savings that extend beyond their death.
That would allow you, or your estate, to transfer your property tax savings to whomever you want (a nephew, a neighbor, a bridge partner), for however long you want.
Think also of the children – especially children related to these longtime homeowners burdened with all that home equity. Under my proposal, that equity could be passed on without a reassessment that would make higher property taxes cut into your inheritance.
I recognize that not everyone in California will support this boost to inherited wealth. For one thing, your plan would cost schools and local governments $2 billion, and mine would cost many billions more. For another, critics see Prop. 13 as generational theft since it reserves for older homeowners moneys that would be better spent on education, housing and infrastructure so that California – with the nation’s highest poverty rate – could have a brighter future.
But Prop. 13 critics don’t recognize what our state has become. Don’t they know that the old represent the fastest growing demographic in our state – while the number of children is declining? Why prioritize the education of the next generation, when old people are the future?
Sure, some people would call our plans extreme. Some people might suggest that we are prioritizing property taxes over more important aspects of life.
Some people just don’t understand what California is all about.
Joe Mathews writes the Connecting California column for Zócalo Public Square. He can be contacted at email@example.com.