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Proposition 5: Changes Requirements for Certain Property Owners to Transfer Their Property Tax Base to Replacement Property. Initiative Constitutional Amendment and Statute.   Recommendation:  No Position.

9/26/2018

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​Proposition 5 seeks to give tax reductions to people with disabilities and those over 55.  In principle this is a good measure useful in a high priced housing market. California’s existing property tax law from the 1978 Proposition 13 has kept those taxes quite low, especially for those with older homes in which they have resided for many years.  But those buying today find the new taxes very high, pegged to the market value of far more expensive homes.
 
The problem comes when people need to move when they are older or disability strikes.  These events tend to come with a reduction in income.  The soaring home sale prices in the state make it harder for people to find smaller, handicapped –access-friendly or lower maintenance accommodations that aren’t considerably more expensive with higher property taxes than they have been paying. That makes them “house rich” but “income poor”. While people may sell their existing home for profit to buy a new one, the monthly outlay on new, higher taxes may be prohibitive.  Eleven counties now give a tax reduction to people with disabilities or those over 55. This measure would direct all counties to honor that reduction so that people would be free to move.  
 
Counties are concerned that this would reduce a critical tax base and do harm to their public school funding as well.  There are reasons why that is accurate and reasons why that may not be true since old houses would be sold at market value, But the concern as expressed by the Legislative Analyst’s Office (LAO) is for a $1 billion loss to counties annually.
 
The problems with this measure lie in the deep confusion of poorly worded guidelines.  Our IMPACT Board came to very different conclusions about what different section meant, and making clear there would be many unintended consequences likely.  There are clauses that make it seem this break is renewable and others stating it is a one- time claim.  It appears to be hereditable which is a serious flaw. 
 
With these poorly-delineated guidelines and uncertain standards, IMPACT supports the principle but cannot recommend this proposition, no matter how good the intent.  

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    The Rev Dr Rick Schlosser

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