Tuesday, December 18, 2012

Proposition 13 "forgot" business transfer, another revenue source for CA

Reform Proposition 13 to include corporation real estate ownership says Willie Brown. 

San Francisco Chronicle Opinion, Willie Brown column, 12/8/12.  "Prop. 13 reform will take clever moves."

"It's good to see lawmakers moving to fix one of Proposition 13's biggest inequities - the tax break that treats corporations differently from homeowners. That break is one of the most unfair parts of the state's tax code. And I should know - I helped write it.

This family "remembered" to get value from CA Prop 13  
....  What we did not realize was that corporations don't actually transfer property - they transfer the stock in the company that owns the property.  And Prop. 13 didn't apply to stock. 

The result is that corporate property that existed in 1978 is still being taxed based on 1978 assessments - even property that has changed hands time and again.  That means a disproportionate burden of California's property taxes is falling on homeowners.Read article. 

Related - National Bureau of Economic Research (NBER),  "The lock-in effect of California Proposition 13."  "Proposition 13, adopted by California voters in 1978, mandates a property tax rate of one percent, requires that properties be assessed at market value at the time of sale, and allows assessments to rise by no more than 2 percent per year until the next sale. This means that as long as property values increase by more than 2 percent per year, homeowners gain from remaining in the same house because their taxes are lower than they would be on a different house of the same value. Proposition 13 thus gives rise to a lock-in effect for owner-occupiers that strengthens over time. It also affects the rental market, both directly because it applies to landlords and indirectly because it reduces the turnover of owner-occupied homes."

Posted by Kathy Meeh 

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