What are your thoughts about Proposition 13? What's good and bad about it? Should it be replaced?

Proposition 13 has been a godsend for working families and senior citizens. Proposition 13 allows you to carry the value of your property when it was purchased (with adjustments for inflation) as your property tax base, unless there's a change of ownership or new construction. When the property is sold, the new owner will assume a new, increased "base year" value based upon his purchase price. Prop 13 helps because while home values are rapidly growing, senior citizens and working families will pay less property taxes than if their property taxes were based on the market value of their homes. Member Horton also supports the reinstatement of the Property Tax Postponement Program to allow seniors and disabled citizens living on fixed incomes to postpone their property taxes.

Proposition 13, however, can allow California property owned by a legal entity to be transferred without paying property taxes on the new acquisition price. It is argued that California taxpayers are force to subsidize an estimated $7.5 billion tax loss due to this provision in the rules. Even supporters of Proposition 13 oppose this.

This can happen when, for example, a commercial property is owned by an entity that itself is owned by multiple individuals or entities. These individuals or entities can sell all their interests in that entity (as long as no single purchaser winds up with more than 50%) and the entity could have entirely new ownership without subjecting the property to reassessment. In other words, even if an owner sells his entire interest in an entity that owns a piece of commercial real estate, the property is not reassessed if no single person or entity acquires more than a half-ownership stake in that entity.

Proposition 13 benefits California residents in several ways:

  1. Caps Property Taxes at 1% compared to 1.75% in Texas;
  2. Caps Property Value Increases at 2% per year;
  3. Property is only reassessed upon change of ownership or new construction; and
  4. If you are over 55 years old, and move within the same county, you can take your Prop 13 tax base.

In addition to supporting these Proposition 13 protections for California residents, Member Horton recently sponsored legislation (AB 2231) to reinstate the Property Tax Postponement Program. Many of California’s seniors and disabled citizens are living on fixed incomes. Many of these are property owners that are increasingly faced with tax bills they cannot afford. This bill also allows counties to enact an ordinance to delay tax sales for qualifying properties that were formerly funded by the Senior Citizens and Disabled Citizens PTP Fund. As a result, this legislation allows senior and disabled citizens to keep their homes.

Member Horton strives to protect the California homeowner which is apparent through his support of Proposition 13 and AB 2231. However, while Proposition 13 has benefited many California residents, it does allow property to avoid reassessment when the legal entity that owns the property is sold in a certain manner.