Our California property tax relief Blog had the privilege of interviewing well known realtor Mr. Devin R. Lucas, CEO of Lucas Real Estate, in Newport Beach, California, on March 13, 2020.
Mr. Lucas is a seasoned real estate professional who is not only well versed in California real estate sales and purchases, but also provides professional assistance with Family Transactions / Propositions 58 and 193 (i.e. selling or gifting to children, grandchildren, etc.); Trust, Estate, Probate Sales & Private Party Sales; Management of Real Property; Landlord / Tenant Matters; and a host of other critical real estate services.
We found Mr. Lucas’ point of view unique, in that his take on tax relief afforded by the 1978 CA Proposition 13, is quite favorable, unlike some in the real estate business. We should also note that we are not referring to the new 2020 Proposition 13, that has been accused of “tricking California consumers…” into believing the new Prop 13 is the same Proposition 13 tax shelter measure passed into law on June 6, 1978. The original, genuine Proposition 13 initiative enabled property owners to avoid property tax reassessment at current tax values, and to keep parents property taxes when it comes time to transfer parents’ property… and, obviously, to transfer parents property taxes, naturally.
Inheriting property taxes was never so stable and predictable as when Proposition 13 went into effect in 1978, and when Proposition 58 passed in 1978, protecting tax relief for offspring going through inherited, gifted or sold property tax transfer.
In fact, this new Proposition 13 “Split-Roll” may ruin parent to child transfer of inherited real estate. It is a totally different measure that has now been revised and put in front of voters, to try to eliminate tax relief benefits for industrial & commercial facilities and business properties in California.
This new property tax measure commonly referred to as Proposition 13 “Split-Roll” may ruin parent to child transfer of beloved, inherited homes and land that often reflects the love and caring aging parents have for their adult children. This tricky tax would most likely create what many financial advisors and tax analysts call a “slippery slope”; sinking California back into an unstable tax system; with arbitrary, unpredictable property tax increases; and the general insecurity and economic malaise among residential, commercial and industrial property owners that follows, as it did so many years ago, before 1978.
Property Tax Transfer: Mr. Lucas, thank you for speaking with us today. We appreciate you taking the time to chat for a few minutes.
Devin Lucas: My pleasure.
Property Tax Transfer: Is there anything viable or helpful with this new 2020 Proposition 13, and the so-called “split-roll tax initiative” being promoted by opponents of the 1978 Proposition 13 tax relief initiative and, by attrition, the 1986 Proposition 58 property tax transfer measure?
Devin Lucas: Let me tell you something. The government has enough money. They don’t need to go after home owners.
Property Tax Transfer: Understood. Can you tell us what rings true for property owners, where Proposition 13, Proposition 58 and 193 are concerned?
Devin Lucas: For existing property owners… the key thing is that you can buy a property and have stability, knowing that your taxes won’t go up more than they should… This creates a sense of security.
Property Tax Transfer: It does. Do you think there is any validity to the claim that because of Proposition 13, and Proposition 58, older home owners are less likely to put their house on the market? Thereby helping to shrink the real estate market to some degree?
Devin Lucas: Well, people do stay longer in a house if they can avoid property tax reassessment. And yes it does benefit some older people. But, hey. It’s not just a property, it’s your home. Why shouldn’t you want to stay in that home.
Property Tax Transfer: Why do so many tax analysts in California talk about the dangers of raising commercial and industrial property taxes with the 2020 split-roll tax measure?
Devin Lucas: Look… If you double taxes on landlords, rents will go up. By keeping property taxes low, rents stay low. Look at it this way, if I sell consumer goods, and my rent doubles I’ll have to increase prices on all the consumer goods I sell. Right? It’s simple. Consumers pay in the end. That’s what a split-roll tax will result in.
Property Tax Transfer: How would a property tax increase from the split-roll tax affect landlords?
Devin Lucas: Landlords will pass increases on to their tenants that own a business, right? Those business owners will increase their prices; salaries freeze or go down; hiring freezes… When property taxes for business owners go up $10,000 to $200,000 or $20,000 to $300,000 – what d you expect? That’s what commercial tenants will do – pass on the costs to customers – the public.