Editor,
Jon Mays gives a nice explanation of the issues and inequities surrounding Proposition 13, and also the fact that it is politically untouchable (“How to get rid of Proposition 13” in the April 8 edition of the Daily Journal). As an example, the annual property taxes on the homes on our four street corners is $2,800, $3,500, $14,000, and $36,000 with similar house and lot sizes.
I know of no other state where this would exist. If you ask folks who are benefitting from Proposition 13 you will get answers about entitlement due to the length of time they have lived here. If you then ask them if they expect a discount using the same reasoning when they go into a restaurant you will get a sneer. Another issue, not mentioned, is the ability to pass on your low tax rate to your heirs, which also prevents home turnover. This fact, along with capital gain issues, almost mandates that the elderly stay in their home until they pass.
In a previous letter, I recommended eliminating capital gains tax on primary residences. If you combine that with modification of the ability to pass on your tax rate, you will get more home turnover, more property taxes to the community to pay for services, a more equitable property tax situation, and still preserve the intent of Proposition 13. However, I haven’t seen any flying pigs lately.
Steve Howard
Redwood City
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(4) comments
Mr. Howard, eliminating the capital gains tax on primary residences may be one way to increase the housing stock but that action may not correlate with decreased housing prices, which seems to be the “big” thing these days – affordable housing. That being said, if we’re not interested in affecting the price of affordable housing, I’m all for eliminating taxes on selling a home. Perhaps we could try your experiment on a trial basis – a one- or two-year exemption. However, how would you get the federal government to overlook this capital gains tax? Granted, a 10% to 12% exemption from CA is nothing to sneeze at, but home sellers still have to pay the 15% or 20% federal rate. Is it worth it to pay the federal rate, or just hold onto your property? Do the math, or contact someone you trust to do the math.
If it weren't for Prop 13 politicians in Sacramento would own us. Almost everyone would have had to sell their home long ago due to high taxes and move into a government housing.
Let us not forget that owners of rental property pass the Prop 13 protections on to their heirs as well. Case in point, a married couple who owned an apartment building in Burlingame were dedicated to keeping rents low for their tenants who were mostly low income people with children going to Burlingame schools. When they passed, one of their sons inherited the building along with extremely low property taxes. He immediately served eviction notices on everyone and kids were pulled out of school mid-year. He claimed that he needed to renovate the apartments but alas, just re-rented them at much higher rents to new tenants. The very least we could do is not pass property tax protections on for people who don't even live in the property.
Sad story that occurs way too often. Landlords threaten to raise rents if they have to pay more in taxes only to raise rents anyway to whatever the market will bear.
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