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HOWARD JARVIS GROUP AIMS TO KILL “DEATH TAX”

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By Susan Shelley

The Howard Jarvis Taxpayers Association is recruiting an army of volunteers for a new initiative to repeal the “death tax” that was a little-noticed provision in last November’s Proposition 19. HJTA filed the initiative, No. 21-0015, with the attorney general’s office in August and is aiming to qualify the measure for the November 2022 ballot.

Prop. 19 was heavily advertised as helping wildfire victims and seniors keep their low property tax base when moving to a new home, but it also enacted costly changes to the tax treatment of inter-generational transfers of property. Because property is most often transferred within families as an inheritance, the new tax rules are effectively a death tax on property.

Long-held properties in California typically have a taxable value that is far lower than the current market value. That’s because under Proposition 13, passed in 1978, the taxable value of property cannot increase more than 2% per year, regardless of the increase in market value, until the property changes ownership. Prop. 13 also cut the statewide property tax rate to 1% of the taxable value, down from a statewide average of 2.67%.

Then, as now, property values were rising dramatically. Prop. 13 stopped the bleeding for homeowners who had been receiving shocking property tax bills for as much as 3% of the new market value every year.

It soon became clear, however, that when family homes and small business properties were inherited, triggering the “change of ownership” reassessment, the new tax bill was so high that it acted like an estate tax, often forcing families to sell properties simply because they could not afford to pay the property taxes.

The problem was so bad that in 1986, the state Legislature voted unanimously to put a measure on the ballot, Proposition 58, to exclude parent-child transfers of some property from the legal definition of “change of ownership.” This meant that when homes and small business properties were inherited, the property tax bill would not be affected. Proposition 58 was approved by more than 75% of voters statewide.

Voters later passed Proposition 193 to extend the same rules to transfers between grandparents and grandchildren if the children’s parents were deceased.

In 2020, many voters didn’t realize that Proposition 19 took away the protections of Propositions 58 and 193. It replaced them with a narrower, capped exclusion that protects only homes that become—within one year—the permanent principal residence of the children who inherit them, and some family farms. All other properties that are passed from one generation to the next—small businesses, rental properties, vacation cabins—are now reassessed to current market value when inherited. The new tax bill arrives in the mail along with the sympathy cards.

Many California residents who have worked all their lives to own a little bit of property to pass down to their children are finding that their plans have been upended by Proposition 19. Given the sharp increase in property values in the state, reassessment of inherited properties to current market value will quite literally tax people out of their own property, forcing them to sell because they can’t afford to pay the new, sharply higher tax bill every year.

That’s why the Howard Jarvis Taxpayers Association is organizing volunteers to collect signatures to repeal the “death tax” portion of Proposition 19, without changing the provisions that protect seniors and wildfire victims. Hundreds of people have already signed up to volunteer and to have the official petitions mailed to them as soon as they are printed.

To qualify the measure for the November 2022 ballot, nearly a million valid signatures of registered voters will be required. It’s an extremely challenging task in a very tight time period. Signature gathering cannot even begin until the attorney general issues a title and summary for the circulating petitions, expected on November 1. The deadline to submit signatures is April 29.

Early organizing will be essential if the effort to repeal the death tax is to succeed. The Howard Jarvis Taxpayers Association is signing up volunteers right now at https://reinstate58.hjta.org/#volunteer and sending out welcome packages of “Repeal the Death Tax” pins, imprinted pens and flyers to help get the word out. When the petitions are ready, they’ll be mailed to everyone who has signed up to volunteer.

No experience is required and all are welcome, whether they plan to collect only their own signature and perhaps one or two more, or whether they would like to set up a folding table and collect hundreds.

More information is available at HJTA.org/RepealTheDeathTax.

Susan Shelley is Vice President of Communications for the Howard Jarvis Taxpayers Association and co-host of the Howard Jarvis Podcast.