When voters passed Proposition 13 in 1978, it rolled back property taxes and placed a cap on annual tax increases until the property was sold. That keeps property taxes low for people and businesses who’ve owned property for many decades. A typical long-time homeowner who sells their home and buys a new one in California often sees their property tax bill skyrocket, since the new property tax is based on current market value. The California Realtors Association (CAR) argues that this dynamic prevents seniors from downsizing and moving to smaller, more age-appropriate housing. This measure, backed by CAR, would allow aging homeowners (55 and older) to take their existing property tax level with them to the new property they buy and avoid the adjustment to market value.
LA Forward opposes this initiative, as it would give a tax break to a relatively affluent group, aging homeowners, at the expense of the rest of the state. California is already financially hamstrung as a result of the passage of Prop 13 in 1978 — while localities in most states are able to rely on property taxes to fund key programs and initiatives, California’s cities and counties cannot, as property taxes can only rise a maximum of 2% annually and cannot exceed 1% of
property’s value. Property tax revenues aren’t keeping up with our communities’ needs. As a result of Prop 13, we’re failing to leverage California’s abundance of highly valued land. There’s also considerable evidence that capping property taxes has actually boosted land values and contributed to higher housing costs. With property taxes capped when California has sought to pay for new initiatives, the state has had to navigate a labyrinth of sales taxes, income taxes, and bond measures, all of which disproportionately impact people at moderate and lower incomes. Passing Prop 5 would exacerbate these woes and leave the State even more reliant on revenue sources other than property taxes. It’s estimated that Prop 5 would cut local government’s revenue by about $1 billion annually.
The sponsors of the measure, the California Association of Realtors, argue that the measure would lead to more seniors downsizing, as low- and moderate-income seniors would be more willing to sell their property and buy a new home without fear of a ballooning property tax bill. But the measure does not target low- or moderate-income seniors at all. It creates a loophole for all aging homeowners, regardless of their net worth or income, and most aging homeowners in California are affluent. California already has to work financial wizardry just to balance the impacts of Prop 13. If voters were to approve Prop 5, it would make matters worse. We urge voters to reject Prop 5.
California Association of Realtors, California Republican Party, Los Angeles Chamber of Commerce, National Association of Realtors, San Diego Union-Tribune
ACLU of Southern California
California Democratic Party
California Teachers Association
Congress of California Seniors
Middle Class Taxpayers Association
LA Voice (PICO California)
League of Women Voters, California
Los Angeles Times
National Housing Law Project
San Francisco Chronicle