Prop 13 Howard Jarvis Tax Changes in California

California property taxes rising: Why?

• Erosion of Proposition 13 Protections: Recent court decisions and legislative actions have weakened the protections of Proposition 13, particularly regarding local special taxes.
• Two-Thirds Vote Requirement Circumvention: Special interest groups are circumventing the two-thirds vote requirement for local special taxes by using citizen initiatives, which only require a simple majority. This allows them to direct funds to themselves.
• Impact on Property Owners: Parcel taxes, which are paid only by property owners, can be easily passed because non-property owners can vote to tax property owners. This can drive property owners out of the area or state.
• Mansion Tax Example: The “mansion tax” in Los Angeles (Measure ULA) is a real estate transfer tax passed via citizen initiative, bypassing the two-thirds vote requirement. This tax impacts not just mansions but also apartment buildings and commercial developments.
• Transfer Taxes Prohibited by Prop 13: Transfer taxes were prohibited by Proposition 13, but loopholes allow charter cities to enact them for general purposes. The initiative seeks to restore the ban on transfer taxes.
• Wealthy Individuals Leaving: High income tax rates in California (up to 14.3% for millionaires) are causing wealthy individuals to leave the state, which could significantly impact the state budget.
• Prop 13 Stability: Proposition 13 provides predictable tax revenue, as taxable values increase annually by 2% or when properties are sold or undergo new construction. This makes it a stable source of revenue, especially during recessions.
• Initiative to Restore Prop 13: The initiative aims to restore the two-thirds vote requirement for local special taxes and ban transfer taxes, providing a two-year off-ramp for cities to adjust their budgets.
• Proposition 19 Impact on Inherited Property: Proposition 19 removed the protection on inherited property, causing significant tax increases for ordinary families, especially on rental properties and small businesses.
• Potential Loss of Affordable Housing: Proposition 19’s reassessment of inherited properties to market value is expected to raise rents and lead to the loss of affordable housing, as landlords struggle to cover the increased property taxes.
• Legislative Action Needed: The California legislature could pass a constitutional amendment to restore the protection on generational transfers and address the unintended consequences of Proposition 19.
• Howard Jarvis Taxpayers Association: The Howard Jarvis Taxpayers Association is a grassroots organization founded to protect Proposition 13.