Skip to comments.35 Years after Prop 13, Has It Worked? [Jerry Brown and Christie]
Posted on 01/10/2014 6:56:53 AM PST by topher
Often described as the opening shot in the Reagan-era tax revolt, Prop 13 limited Californias property tax rates, but has it yielded greater fiscal discipline? What about tax and expenditure limits in other states?
Today is the 35th anniversary of the passage of Proposition 13. The California ballot initiative limited the states property tax rates and transferred responsibility for allocating local property tax revenues to the state legislature but did it yield an increase in fiscal discipline?
(Excerpt) Read more at american.com ...
So the current governor of California has this in common with Christie of New Jersey: punish and take punitive action against those who do not do their [evil] bidding.
At the same time, Jerry Brown established a $1 million art fund that was chaired by Hanoi Jane Fonda
Your typical politician-punishes-the-citizens attitude...
No, but then again, that's not what it was meant to do. It was put in place to prevent WILD fluctuations of your property taxes that was causing peeps to lose their homes.
Wouldn’t that be 35 years after Prop 13 went into effect? I never heard of CA having a Proposition election in January.
Let us not ask whether prop 13 protected homeowners from being taxed out of their homes by capricious and greedy politicians and bureaucrats who raised their property taxes to ridiculous levels on a whim & spent their tax dollars like drunken syphilitic sailors.
Let us instead decide the success or failure of prop 13 on whether the capricious and greedy politicians and bureaucrats managed to curtail their wild spending habits over the past 35 years.
NO SALE, A-HOLES.
You’re right. It was a June ballot.
I was too young to vote, but remember it.
Look at the date — this article is from June.
Posted today since:
(1) Jerry Brown is governor again in California (as was true in 1978)
(2) Chris Christie political payback being in the news...
There was much talk about Jerry Brown establishing an art committee with $1 million at a time when Police and Fire services were cut drastically (to punish the voters).
My parents live in CA. What’s misleading about this article is that once you sell your house, the Prop 13 reforms go out the window.
My parents still enjoy the low property taxes that 13 brought to them, but only because they never sold their place. They’ve been in the same house for 40 years.
I doubt Prop 13 even effects 10 percent of property at this point.
Another feature of Prop 13 is the ability of owners being able to transfer that property tax rate to another property at equal or lesser value (sometimes across county lines as well). We are looking to do that with our property that we have owned for 25 years.
The property tax should be related to what you paid for the property, not what your neighbor paid for theirs.
It would be like accessing your 1973 car the same as a 2014 Cadillac.
We lived in our home for over 30 years, it is paid for, and our property tax is reasonable. Of course people have moved in and out of the neighborhood over the years and so it is reasonable to assume that they pay more in property tax then I do since they paid more for their home than I did.
The house has no more value if I don’t sell it until I do in fact sell it. So I have no income or money in the bank because the selling price today is more than I paid for it.
When someone buys a home today they too are protected by Prop 13.
The main goal of Prop 13 was to keep the politicians from taxing people out of their homes. In that regard it is a success.
Just read an article out of the LA Times, I believe, that stated that due to natural turnover the number of residential property still benefiting from Prop 13 was well under 20%. The number of commercial properties benefiting was around 16%. The estimate is that by 2020 nearly all CA properties will no longer enjoy the full effects of Prop 13. The article was written to point out the waste of time and energy to disallow commercial property to benefit from Prop 13 via a constitutional amendment vote.
My aunt has lived in the same house for 50 years. She pays taxes on a $15,000 house. The market value is over $600K. I saw it myself on Zillow.
Property tax rates in our county were 8.5%. Think about what that would mean to the value of California real estate. To re-institute property tax rates that high in California has the potential to crash the banking system worldwide.
The property is reassessed, that is true, yet the rate at which the assessed value can climb is still capped.
It affects EVERYTHING.
Prop 13 is the only sensible thing this state has done in 35 years from all appearances.
Our property taxes have remained stable, (outside of a plethora of BS assesments continuously passed by “votes” that include the elderly as voters but exempt them from paying) since we purchased in 1996.
I would have paid something on the line of $100,000 more in property taxes since then were it not for Prop 13. Without it, the condo we purchased in the 90’s would have blown out in property taxes during the criminally facilitated real estate run-up and then when it crashed we would have spent gobs of time every year trying to get it re-assessed down to the revised level.
The fact that it’s structured to roll over on an exchange is implicit within it, it’s not “misleading”. Prop 13 effects every single residential property (and to a lesser extent commercial I believe) in the state, how much depends on how long you stay in it...
It warms my heart to know your Aunt is safely ensconsed in her home with a low tax rate, secure from the ravages of rapacious politicians!
While Prop 13 was a good idea, the politicians have managed to get around the 2% limit. Our property “taxes” have gone up much more than 2% a year. The reason, many of the items that were subject to the property tax, were removed from that designation and listed separately at “fees”, “special assessments” and a few other designations. So while it was a good idea and still helps, the politicians have bastardized the system so they can still increase the amount of money they take from you without calling it a “property tax”, even though it is included on your tax form.
It’s what my parents did as well. What we will end up doing is, for whoever moves in, which will likely be my youngest brother, we’ll assess him rent and tax equal to 2/3 of the value of the property, and all of the tax due on it.
He’ll essentially pay the trust until he ‘owns’ it, though it will remain in the trust. I’ll have to look closely at how proceeds get distributed and taxed out of the trust.
Thanks for the tip.
Nothing like planning for your parents to die while they’re still alive. Pretty macabre, actually.
Looking at a similar situation with my 2 siblings. Our elderly mom lives 2 blocks from beach in a CA home that Zillow says is worth $1.4 million, but the CA tax assessor has on the books for only $130,000. Losing Prop 13 coverage would require the family to sell, as none of us is prepared to pay 14k+ yearly in prop taxes.
I would like to live there with my small family when the time comes, so we’ll also need to also engineer a fair way to do that doesn’t trigger a reassessment.
As I understand it, the trust is like a person, with it’s own estate. The trust never dies, so as long as assets stay in the estate, there are no estate taxes.
If the trust is the tenant, I think you’re good. What happens to the pool of money that piles up from rent, I’m not sure. If it stays in the estate, no problem. If it leaves, there has to be some sort of tax or penalty, but I don’t know if there are ceilings on that below which you wouldn’t have to pay one.
“Nothing like planning for your parents to die while theyre still alive. Pretty macabre, actually.”
Oh no no no. Please, re-assess that view.
There are a great many things of consequence large and small that are a hundred times easier if they are handled in a mutually agreeable way versus under the duress of a parental death. I just went through this with my folks. I cared for them the last 5 years of my Mom’s life, 2006-2011, and my Dad, 97, is still in a board & care. My Mom and I talked all this stuff out in great detail, over many occasions, and the process of getting her into the same board & care for her hospice (physical problems) as my Dad (dementia) was handled, if I may say so, in virtuoso symphonic fashion by yours truly. (Although she died 3 years ago, my Dad actually has no idea that she died-—even though they lived in the same B&C for the last 6 mos of her life. And I have no intention of telling him, it would crush him. They were married 71 years) It happens to be rather unusual for an elder facility to intermix medical patients with dementia/Alzheimers patients. Why? Dunno. One of those things.
Over and over and over in this saga, I can tell you that this is a process you have probably done ZERO times and everyone you will interact with has done it 500 (or 5000) times. And I myself hate that asymmetry, because like many things, out of ignorance, you do not even know what questions to ask. But when the curtain comes down, you will be stuck following a script that you never even knew about.
Let me just list some things that were massively easier because they occurred via talk-it-out and plan.
Ensure that trust docs are in conformance with current law (they may have been written in 1985) When my folks *might* have died, 2010-2011, were entering senility, there was serious talk about a failure to extend the estate tax exemption at $5 MM, in which case it would have dropped to $1 MM. With my folks, who had a better than average house in a pricey neighborhood (their luck for picking it 25 years ago) and a ~~$1 MM stock account, that would have been a $550,000 check we might have had to write. We are not talking Rockefellers, just a middle class professional who put two kids thru school and worked a better than average wage for 40 years. And made no serious mistakes. $550K is a big check, in my book.
Whomever is taking care of them as for shopping and home expenses, if a trusted family member, get that person’s name on the house checking account.
You realize, I take it, that once one parent enters a state of observable senility, there is no way to have them notarize documents without a DURABLE power of attorney and if you haven’t achieved that POA BEFORE they go goo-gah, YOU NEVER CAN...without obtaining a conservatorship, a complete and total PITA that will probably cost $15K-$20K in legal fees and might take so much time that one dies before it is completed and if anything is screwed up at that juncture you could be indelibly HOSED with NO WAY to correct things. Completely avoidable by preparing the dur POA in advance. How can you prepare such a thing with a “reluctant” elder who is not willing to face their own demise? You can’t. But the consequence of not doing so can be profoundly expensive, compared to FREE.
Shop for a particular board and care location.
Develop contacts within the local social-worker network, a completely invisible underworld of people who work around most hospitals in the country who you never even know about. There are many, many invisible people who work around hospitals and elders who are going to be dying in a few years. Once you find a few of them, an entire underworld opens up that can be a profound resource for you....it is one of those things where YOU can take advantage of people who have done this 5000 times. And they are happy to help. Amazing.
In your case, IANAL, but it is almost always wrong to allow property to pass by anything but inheritance, if there is any way in the universe you can do so. Nobody should be buying RE out of a trust. In my humble opinion. There is, in general, no bigger mistake that a property owner can make than “putting their kids names on title so that the probate goes smoothly”. Big, big, enormous mistake. People make stupid, costly, awkward mistakes in these situations acting out of “common-sense” “instincts” which SUCK when it comes to actually conforming to THE LAW that will tax your eyeballs out if you give it the chance. There are VERY CRITICAL moves to make, and they must be made precisely. They are not difficult, but an amateur “playing lawyer” based on “common sense” can cost hundreds of thousands of dollars. Can create such an enormous tax liability that it forces you, the heirs to immediately sell the property to pay the tax bill.
There is nothing macabre about this, with all due respect. The end of life is a certainty, just not the time.
What IS a massive problem and leads to incredible difficulties is for a parent to pass with sloppy will/trust papers, non-perfected (or NO) POAs to the various institutions where accounts may be located, with poorly written, ambiguous instructions as to the disposition of the estate, with siblings and heirs having different understandings of what is to be. THAT is a mess, Guaranteed.
Prop 13 has saved me a fortune over the years.
You know it’s been a success when every liberal in the legislature wants to abolish it so they can rob people blind again (longing for the good old days)
He eventually paid off the loan after 30 years (this was the 1970's). He joked that the bank would not know how to handle someone paying off a 30 year loan in 30 years...
He eventually sold the house around $200,000, but by then he had a couple of houses out in Palmdale/Lancaster.
If Prop 13 had not passed, some people might have been paying more for property tax than for their bank loan on the house (per year).