NOV 2020 PROPS–Our Recommendations


What does Proposition 15 do?

It’s called “The California Schools and Local Communities Funding Act;” but its real purpose is to raise government revenues by increasing taxes on business properties.  It does this by enabling the taxable value on most business properties to be reassessed every year – instead of being based on the original purchase price.  It’s a direct attack on 1978’s Proposition 13 that restrained property taxes on homes and businesses. 

Prop 15 is called “split roll” because it will tax commercial and industrial properties differently than homes.   The announced target is “large companies” — those with more than three million dollars in property or more than 50 employees.  The measure will enable counties to reassess those companies on a phased-in 2-year schedule.  The Prop 13 cap of one percent of the assessed value remains in effect; but since most properties have greatly increased in value over the years, the tax increase will be enormous the first time.   

Imagine a building that a company bought 20 years ago for, say, $20 million; it’s now assessed at $30 million; but its market value is more than $100 million.   Prop 15 will trigger a huge increase in the property tax.   And it will stay large from then on.

How will companies respond?  Remember, taxes are a cost of business.  If the increased tax cannot be covered by current revenues, the choices are (1) pass the new cost on to customers, (2) reduce the number of employees or their compensation, or (3) leave.  Whatever they choose, their customers and employees will suffer.

A large number of companies have left California in the past 20 years.  The exodus will accelerate if Prop 15 passes. Their jobs will go with them.

What happens to smaller companies not subject to annual reassessment?  If they obtain services or materials from sources affected by the new tax law, their expenses will go up.  They will face the same choices as the larger companies – charge more for their goods, lay off workers, or leave.  We all suffer.

Are farmers affected?  Yes, indeed.  Even though Prop 15 says agricultural land is not reassessed – as long as the present owner lives on it and farms it — everything farmers buy will cost more; things like equipment, fuel, seed, fertilizer.  They will have to charge more for whatever they produce.  If farmers are not able to compete with lower priced products from outside California, they will go out of business.  Again, we all suffer.

Even though homeowners are not affected by the split roll measure, renters will be.  Everything landlords buy will cost more.  Rents will go have to go up. 

So what’s the effect on all us?   Everything we buy will cost more!  If employers reduce hours or pay and benefits, some families won’t be able to make ends meet.   Some will lose their jobs.  Some will have to move.

Proponents say that the new revenue will go to schools.  But the tax pie will shrink as companies go out of business or leave the state.  Schools will not get the amounts they envisioned; their financial problems will worsen.

Think about it.  Government needs more money – it always needs more — and Prop 15 is the latest scheme to get it.  With the state’s economy in shambles because of the corona virus lockdowns, it’s another “nail in the coffin.”

Think about what Prop 15 will do. 



Proposition 19 Boasts Good, Bad, Ugly Outcomes

California taxpayers, have you been paying attention? We are under serious attack yet again.

Our Legislature has approved another huge tax increase in the guise of Proposition 19 and has managed to sneak it onto the November ballot, using language that only a tax attorney would understand.

Proposition 19 at first glance doesn’t look that bad. The good part of Proposition 19 is that it would allow homeowners 55 and older or disabled or victims of natural disaster to take a portion of their tax base with them when they sell their home and buy a new one.

The bad part of Proposition 19 is that it penalizes children who inherit homes from their parents or grandparents by allowing homes which are inherited to be reassessed to current, fair market value if the children choose to not use the property as their principal residence.

The ugly provision of Proposition 19 is that it states that family farms shall be treated the same as family homes upon transfer of property. If a child inherits a farm and does not want to work it, it inevitably goes up for sale. When this happens, it will be taxed at the current market value, many times higher than its assessed value. If the child decides to remain on the farm, the assessment markup only exempts $1 million from the market value, which could result in an enormous tax burden.

This is how agricultural businesses easily snatch up family farms.

When Proposition 13 was resoundingly passed in 1978, it guaranteed residential property annual tax increases to 2% per year and guaranteed our property would only be reassessed to market value when sold.

Proposition 58 also passed in 1986 by a huge margin, changing the state Constitution. It protected children who inherit their parents’ property as there would be no change to the tax structure. A property worth up to $1 million could be transferred between parents and children without reassessment.

Proposition 19 would repeal Proposition 58, forcing the reassessment of parent-to-child properties and those properties transferred within families. It would also take away Proposition 13 protections that property owners now enjoy. The “intergenerational transfer protections” which were instituted by both Propositions 13 and 58 could cost the California taxpayers billions of dollars.

Proposition 19 is not fair to all counties. Some counties feel that they will actually lose tax revenue due to having less-expensive housing and fewer businesses than the wealthier counties. Proposition 19, introduced by Democrat Assembly member Kevin Mullin, is really sponsored by the California Association of Realtors. The Realtors argue that current property taxes do not give incentives to longtime homeowners to move, which keeps homes from being resold, especially to new families.

Watch your backs, Californians, or watch your taxes continue to grow out of control. We were assured that our taxes were protected by both Propositions 13 and 58. Voters can always be assured of one thing: Politicians will never stop trying to steal our money by raising taxes.



Proposition 21: Does Rent Control Help California?

No one denies that California has a major housing problem. Rents are among the highest in the nation.

But is Proposition 21 – which proposes statewide rent control on rental properties over 15 years old – really the answer?  Here are just three key reasons why it is not.

First, California already has one of the strictest rent control laws in the nation. The state Legislature just passed Assembly Bill 1482, which became effective Jan. 1. The Rent and Tenant Protection Act of 2019 limits annual rent increases on apartments over 15 years old to 5% and prevents unwarranted tenet eviction statewide. Why not allow time to give the law a chance to work while developing other real solutions to California’s housing crisis? The proponents of Proposition 21 are unable to say why we need a new and different rent control measure.

Second, Proposition 21 does not address the real issues causing the current housing stock shortage. California’s inventory is now estimated at 3 million to 4 million units short of what is needed. It ranks 49th in the United States in housing units per resident. This has led to higher rental costs and the growing problem of homelessness.

Building more units through state-backed bonds, offering subsidies to low-income people, easing costly land-use regulations to incentivize developers are all methods other localities and states have used to increase their housing stock, while at the same time creating well-paying jobs – something that is greatly needed right now. Proposition 21 addresses none of these issues.

Third, there are a great many unintended consequences that come with rent control. The first is a loss of property taxes as the rental properties decline in value. The state also loses when property owners who are making less money pay less personal taxes. Both of these losses lead to cuts in state services – particularly our schools, which depend on income and property taxes as their main sources of revenue. The state’s nonpartisan Legislative Analyst’s Office estimates that under Proposition 21, the cost for local governments would increase by tens of millions of dollars each year and would cost the state millions more in lost revenues. Can we afford that right now?

Another unintended consequence is what happens to the rental market. It shrinks

Apartment owners have come to realize that they can convert their units into condos or B&Bs and take them off the rental market. If the property is old enough and is not turning a profit, an owner may abandon it, build a new apartment building which is not subject to rent control and charge more for the new units, or reduce the amenities that current residents receive such as laundry rooms, playgrounds or landscaping. Any way you look at it, the number of rental units shrinks or becomes more expensive.

California voters should think hard before they pass Proposition 21 in November. It is not what it says it is. In fact, it’s just the opposite.