ACA 9 would preserve family businesses, affordable rental properties, and homeownership for families

At your request: This week's California Commentary by Jon Coupal
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** California Commentary
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** ACA 9 will protect California families climbing the economic ladder
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By Jon Coupal

Every parent wants to help his or her kids and protect them from hardship. Many families that started out with nothing were able to build, with hard work and sacrifices over two or three generations, a bit of economic security that they hope to pass on to the next generation.

This is the reason that Californians voted overwhelmingly to abolish state inheritance and gift taxes. In 1982, there were two competing measures on the statewide ballot that repealed and permanently banned the hated taxes. Both measures passed with more than 60% of the vote.

Meanwhile, Californians were frustrated that rapidly rising property values had turned property taxes into what was effectively a death tax. Under Proposition 13, passed overwhelmingly in 1978, property tax assessments may rise no more than 2% per year until there is a change of ownership, at which time the property is reassessed to fair market value. Children who inherited their parents’ property often found that they could not keep it, because the new tax bill was more than they could afford to pay every year.

As a result, in 1986, the state Legislature unanimously passed the measure that became Proposition 58. It changed the state constitution to say that the transfer of certain property between parents and children would not be considered a “change of ownership” and would be excluded from reassessment, keeping the property tax bill the same. Proposition 58 passed with the approval of more than 75% of voters statewide. Ten years later, the voters approved Proposition 193, to apply the same rules to transfers between grandparents and grandchildren if the children’s parents were deceased.

Under Propositions 58 and 193, families could transfer a home of any value and up to $1 million of assessed value of other property. That protected families that owned a small business, or a duplex that was rented out for income, or a vacation cabin. It meant the death of a parent would not trigger a sudden reassessment of those properties to market value, thereby raising the annual property tax bill so high that the children were forced to liquidate their inheritance.

That’s why it’s a tragedy that a slick advertising campaign for Proposition 19 tricked voters into repealing Propositions 58 and 193 without realizing the impact it would have on their own families. Prop. 19 replaced the parent-child transfer exclusion from reassessment, which has been in the state constitution for 35 years, with a narrow exclusion that only applies to homes that the heirs move into within a year and make their permanent principal residence.

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Click here to listen to this week's Howard Jarvis Podcast, "So Left, They Left." ([link removed]) The Howard Jarvis Podcast features HJTA President Jon Coupal and VP of Communications Susan Shelley with a lively conversation that takes you inside California government in a way that's fun, interesting and sometimes scary. Check out all the recent podcasts by clicking here: [link removed] -- it's easy to listen on your cell phone, tablet or computer. Just click the "play" arrow next to the title. Questions for Jon and Susan? Email us at [email protected] and tune in!
A note to our valued members and supporters: To increase the reach of our message to as many Californians as possible, HJTA made an agreement with the Southern California News Group papers to carry Jon Coupal's weekly column. The newspapers in the group, including the Orange County Register and the Los Angeles Daily News, have added a paywall that allows only a limited number of page views per month, and then asks readers to become subscribers. HJTA is not marketing these subscriptions or receiving any payment from them. The columns are exclusive to SCNG's papers for one week and then are posted in full on HJTA's own website, www.hjta.org ([link removed]) , under "California Commentaries," where you can read them at your convenience, or read Jon's column online in all the SCNG papers at these links:
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Jon Coupal is the President of the Howard Jarvis Taxpayers Association (HJTA). He is a recognized expert in California fiscal affairs and has argued numerous tax cases before the courts.
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