Walters: Proposition 19’s Tortuous Journey to the Ballot

Proposition 19 shares one characteristic with most of the other 11 measures on California’s ballot this year: It rekindles a political conflict from years past.

However, Proposition 19 has meandered a particularly convoluted pathway to the ballot, which explains why it wound up with three distinct sections, to wit:

—It would expand current law’s limited right for Californians over 55 to move to new homes while retaining the taxable property values of their previous residences;

—It would erase a provision of property tax law that allows those who inherit expensive homes to retain their relatively low taxable values while converting the homes into income-producing rentals; and

—It would dedicate some of the additional revenue from the loophole closure to local and state firefighting agencies.

The first provision, dealing with transfer of property values, was the subject of a 2018 ballot measure sponsored by the California Association of Realtors. It would have expanded statewide the current right of the over-55 set to transfer values within counties, or to other counties that agreed to accept them. That’s been the law for more than 30 years, thanks to a series of voter-approved ballot measures.

Real estate brokers have an obvious interest in expansion since it would, at least in theory, generate more sales of homes that would produce more sales commissions. However, voters rejected the 2018 measure by a 3-to-2 margin.

The Latter Provision Could Have Undermined Proposition 15

The realtors wanted to try again in 2020 and qualified a new measure, which also included the inherited property loophole closure and a third provision, long debated in tax circles, to require reassessment of commercial property when ownership changes in a series of transactions.

The latter provision could have undermined Proposition 15, a measure sponsored by unions and other liberal interests, that would, if passed, require regular reassessment of all commercial property for tax purposes.

Thereupon, a deal was struck by the realtors, legislative leaders and Gov. Gavin Newsom to replace the initiative with a constitutional amendment that would include the first two provisions, drop the commercial property section and add the firefighting revenue as a political sweetener to take advantage of voters’ concerns about rampant wildfires.

Even so, the legislative version didn’t meet the official June 25 deadline for inclusion in the November ballot, so the Legislature quickly passed another law extending the deadline by a few days through the subterfuge of calling a concurrent special election.

Tax Reform or Tax Increase? Voters Will Decide.

Allowing heirs to keep relatively low property tax values also dates from a series of decades-old ballot measures, but two years ago, an article in the Los Angeles Times revealed that multi-million-dollar homes were being maintained as high-dollar rentals, rather than occupied by heirs.

The article focused on a Malibu home with sweeping oceans views formerly owned by actor Lloyd Bridges which his sons, actors Jeff and Beau, and their sister inherited and retained as a nearly $16,000-per-month rental. But the article also cited numerous other instances in which heirs took advantage of low property tax values to profit handsomely in the rental market.

Its uncertain whether the cosmetically altered proposal, which was designated as Proposition 19, will fare any better than the bare bones 2018 version that voters rejected. While it enjoys wider interest group support, it’s also created a political split between the California Association of Realtors and the Howard Jarvis Taxpayers Association, which supports the over-55 tax shield but sees the inherited property provision as a “massive, multi-billion-dollar tax increase on California families.”

Tax reform or tax increase? Voters will decide.