Despite Media Claims that Prop 13 Favors   Older, Wealthier Long-Term Property Owners

In a powerful article entitled, “No It’s Not Just for Seniors — Prop. 13 Has Something for Everybody” (Click Here to Read Entire Article)… written by the talented writer Jon Coupal for the legendary Howard Jarvis Taxpayers Association, Mr. Coupal wields the truth about how  Proposition 13 continues to provide tax relief to regular middle class Californians, not just the rich; the way a knight in shining armor wields a glistening sword in battle.

Mr. Coupal points out the following benefits Proposition 13 continues to provide for mainly middle class homeowners in the state of California… despite unfounded claims from several sectors in California that insist, without convincing data to back it up, that wealthy homeowners have been the true recipients of real property tax break benefits from Prop 13, since 1978, Click here for more discussion on this false claim. Mr. Coupal tells us:

“…By lowering the tax rate from nearly 3% to 1% and restricting annual increases in assessed value to 2% – Proposition 13 has provided a stable system for all – including government agencies that depend on property taxes.  Still, the opposition continues to gin up discontent against the tax-limiting measure – using absurd and sometimes insidious arguments. Critics whine about fairness like children in a school yard shouting “Not fair! Not fair!” They point out that in some neighborhoods a recent home buyer is paying more in taxes than a neighbor who has owned their home for thirty twenty or even ten years.

This they claim shows that the tax burden is being born by the young while older property owners reap the benefit. Of course this is nonsense. The longtime owner has been paying property taxes for years — property taxes that built the infrastructure the new buyer now enjoys — and they began paying based on what they could afford to pay for their home at the time of purchase. The new buyer is in the exact same position in that his or her taxes are based on what they can afford now and they too enjoy the benefit of knowing what their taxes will be in the future.

What Proposition 13 provides to both new and longtime homeowners alike whatever their age is certainty and security in taxation. And the critics of this system are not in the least bit concerned about “fairness”; they are looking for more money from the older owners.”

Opponents to Proposition 13 claiming that new home buyers moving into the same neighborhood as home owners that have been living there for 20 or 30 years are always young – is an absurd claim to begin with.  How can these critics possibly make an assumption that all these new home buyers are young ?

Secondly, how can they possibly make the jump from there that young home owners therefore carry the bulk of the property tax burden in California… when in fact Proposition 13 continues to provide tax relief to younger property owners, or, more realistically, new home buyers, with the same tax relief benefits as older home owners receive, or as long term home owners that have been living in the same home for decades, receive.  It’s an even playing field. To claim this is not so is simply out of step with reality.

As a matter of fact there is no factual data to back up either argument – long term dwellers or elderly home owners. Hence, this is yet another unfounded claim to back up a clearly biased argument to denigrate and tarnish Prop 13… built on a stack of cards. Not facts. As a matter of fact, we’d go so far as to suggest that this entire point of view, for some, is built on an obvious bias against older folks. It’s called “age-ism”, a bias we’re all familiar with.

For others, who make a living in the real estate game, and are presently grappling with a decrease in homes available for sale in certain areas in California – it wouldn’t be entirely unrealistic to suggest that this critical argument is merely an effort to get more properties on the market, to help realtors and brokers generate more revenue! And for newspapers who take this side of the argument, to generate more revenue from real estate ad sales. These issues go hand in hand.

Certainty and security are important matters to elderly Californians; so in fact (alluding to Mr. Coupal’s article title), the Proposition 13 tax break actually does benefit seniors in particular, not only due to the ability to avoid property tax reassessment – but due to the fact that many seniors see a slow-down in income in their mid to late 60s… Therefore a program that prevents their property taxes from going up and in fact sustains a very low rate, when you add it all up, at 1% to 2%, is going to be beneficial to, and popular with, elderly property owners who tend to live on more of a fixed income than many people do who are in their 30s, 40s and early 50s, for example.

So with all due respect to Mr. Coupal, it’s not a negative matter to point out that Proposition 13 does help to provide older property owners with a more predictable and affordable future. As a matter of fact, this applies to anyone living on a fixed middle class, or even upper middle class, income. We could look at veterans, retired police officers, post office and other municipal or govt. workers; as well as retired white collar folks living on retirement benefits from a former job, although, regrettably, that appears to be a fading prospect for most Americans these days. However… just the same.

The point is, Prop 13 contributes predictability for people who need a predictable future, economically. Certainly, some of these folks may have some stock here and there, but as we can see from recent events, Wall Street investment outcomes are not exactly something we can depend on these days – no matter how many analysts and financial advisors claim to have a financial crystal ball.

At any rate, let’s revisit some of these critics of Proposition 13, shedding crocodile tears and feigning interest in being “fair” to all homeowners… while at the same time really wanting more money from home sales, from buyers of all ages, in particular older buyers – as well as more cash from higher rentals. More expensive home values typically equal higher rentals. Which further feeds the bias against older home owners.

So if elderly home owners maintain the same primary property for decades, and possibly own additional properties as well, critics of Prop 13 insist that these homes inherited by adult beneficiaries, with current property value reassessment out of the picture thanks to Prop 13, all adds up to Proposition 13 being the sole cause of property owners keeping homes in the family… going to offspring rather than being available to as properties for sale.

Mr. Coupal really is 100% correct. These homes, going to adult children, without reassessment and a higher tax hit, would be inherited by these children of elderly homeowners regardless of Proposition 13 non-reassessment, or even California’s Proposition 58 property transfer tax break. People transfer property, or enable their children to inherit their property, regardless of whether they are benefiting from a tax relief program, or not. This is simply what people have been doing for their children for hundreds of years! Way before Proposition 13 ever appeared on the scene.

The below argument, and you can read the entire diatribe by clicking here, https://lao.ca.gov/Publications/Report/3706 is exactly the type of standard critique Mr. Coupal is talking about in his article at Taxpayer Association. These critics frequently take a wild leap to a conclusion that is merely a fear based outcome, not factual one – should you be a realtor or residential property sales executive, experiencing dwindling sales lately. They are taking some factual information, mixing it all up together and coming up with the following conclusion:

“Inheritance exclusions appear to be encouraging children to hold on to their parents’ homes to use as rentals or other purposes instead of putting them on the for sale market. A look at inherited homes in Los Angeles County during the last decade supports this finding. [Data] shows the share of homes that received the [Proposition 13] homeowner’s exemption—a tax reduction available only for primary residences—before and after inheritance. Before inheritance, about 70 percent of homes claimed the homeowner’s exemption, compared to about 40 percent after inheritance. This suggests that many of these homes are being converted from primary residences to other uses…”

In actual fact, this homeowners exemption from tax reassessment does apply to non-primary (i.e., additional) properties. So this part of their premise is in fact incorrect. Advancing this type of argument, that all these homes in California are not shifting to home sales, making money for realtors; and are robbing desperate Californians of the ability to purchase lovely homes in safe neighborhoods – and that this is strictly the fault of Prop 13 tax reduction, and is just plain “unfair”…

Actually, what this is all about is not “fairness”… it’s basically indicating that shrinking home sales throughout California is specifically due to older Californians taking advantage of tax relief from Proposition 13; and that the Prop 13 tax break is somehow the main reason elderly homeowners are allowing their beneficiaries to take over their aging properties, as opposed to their property or properties going to some real estate company to generate hundreds of millions of dollars in extra revenue. That is, frankly – absurd.

Adding all this up, somehow ending up where senior homeowners would not be providing beneficiaries with inherited property if they were somehow not benefiting from property tax relief is completely devoid of logic. As we have already said, parents transfer property, or make it possible for their children to inherit their property in every state in the union, whether they are benefiting from a tax reduction law called Proposition 13 or not! Somehow also making the jump to the theory that the overall California property tax burden is now being shouldered mainly by young homeowners, while older property owners who have been holding onto their old homes for decades, are somehow reaping the benefit of a general lack of home sales. Because they can save a few dollars in taxes, plus leave property to their children?

With all due respect, these arguments, proposed in newspapers and by certain local politicians, make no logical sense. Especially if you look at most of the homes that are being held onto and shifted over to beneficiaries. A lot of these homes are middle class homes, not super fancy upscale affluent homes, and, most importantly, they have depreciated over the years, not appreciated. So most of those properties need real work.

Proposition 13 continues to provide tax relief for all California  homeowners, with zero negative impact on the real estate market. To suggest that most of these older homes owned for decades by elderly people, would somehow be snapped up in a second in the real estate market, isn’t terribly realistic, is it. Yet critics of Proposition 13 and Proposition 58 continue to insist that wealthy homeowners are still benefiting more from these laws than middle class folks or anyone else in California, and that they somehow are continuing to shrink the real estate market, in areas like Santa Barbara, and San Francisco, Santa Cruz, and Los Angeles.

Proposition 13 continues to provide tax relief for regular everyday home-owning Californians, not matter how much the critics bray  about how all these benefits are going to the old and to the rich. It’s just not so.  You can continue to try to jam a square peg into a round space for some time… But after awhile it starts to become obvious that it just doesn’t make sense. Hopefully the media and certain critical politicians in California with special interests in the real estate business will also begin to see once and for all that these square peg arguments against Prop 13 just aren’t fitting into that round space called logic.