Prop. 19 closes a tax loophole and helps fund more firefighters. That’s a win-win

Proposition 19 would be good for seniors who want to downsize, for local government coffers ravaged by COVID-19 and for anyone worried about wildfires. That’s plenty of reasons to vote yes.

The property tax reform measure would allow seniors looking to move closer to children and grandchildren to keep tax breaks after relocating, perhaps to smaller and more manageable quarters. The same common-sense incentive would extend to disabled people who might benefit from living closer to family, and to wildfire survivors forced to relocate.

But government agencies can’t afford to lose millions of dollars extending such compassion. Prop. 19 would make up for the revenue loss, and then some, by closing a loophole exploited by relatively few landowners.

Provisions of Proposition 13, the landmark tax initiative embraced by California voters in 1978, keep property tax rates reasonable as long as the property doesn’t change hands. When it does, taxes are adjusted to the current, higher rate — as they should be.

The loophole allows people who inherit property — often, vacation or second homes — to continue paying taxes at the lower rate enjoyed by the previous owner. That’s unfair to the rest of us.

Two years ago, proponents tried to close the loophole with another initiative, Proposition 5, and failed. The idea lives on in the current Prop. 19, with a big change that proponents hope will make a difference.

This time, a portion of proceeds would be set aside for local and state firefighting agencies. That represents a welcome boost at a time when wildfires are on everyone’s mind, and the extra income also could rescue some small, struggling fire districts, said Brian Rice, president of California Professional Firefighters.

New government income without a new tax

Meanwhile, most cities and counties have suffered huge hits to sales tax revenue because of pandemic closures. The extra money from closing the transfer property loophole would provide local agencies with hundreds of millions of dollars just when they need it most, rising to billions in a few years, analyses suggest.

This is completely sensible, but some people — those lucky enough to inherit vacation homes — won’t like it. They’ll have to pay taxes based on appropriate rates and not the low rates enjoyed by their parents or grandparents. They can keep the lower rate if they want to move into the inherited home rather than turning it into an income-producing Airbnb or Vrbo rental. It’s their choice.

Critics of Prop. 19 complain that it would reward real estate agents who would theoretically make more in commissions because more people will find it more economical to move if they can take lower property tax rates with them. That’s not a good reason for rejecting a policy change that will help far more people than it hurts.

It’s time to close the inherited property tax loophole exploited by an elite few. Prop. 19 will help cities, counties, fire agencies and people who need to downsize or move closer to loved ones. The Bee recommends a yes vote.

This story was originally published October 15, 2020 at 5:00 AM.