|
Life before Prop 13: Taxed to Death |
|
|
Insight
By Harold Katz
As I read articles and see comments from taxpayers in opposition to Prop 13, I conclude that they either were not born in 1978 or they were too young to understand what was going on then.
Let me say that that I hate Propositions. They are usually poorly
written and result in unintended consequences. They are the result of
the inability of our elected officials to legislate, which is what they
are paid to do.
Most people do not remember that there were two Propositions, 8 and 13, dealing with the same subject on the Ballot. Proposition 8 was written by the legislators and it started out as a well written alternative to Prop 13, but then Governor Jerry Brown got involved and it became a non alternative. He told me that the people will not vote for Prop 13 and all they were looking for was $100 of relief. Either he was pulling my leg or the Governor had no idea what was going on in the real world.
Let me refresh everyone’s mind. At the time of Prop 13’s birth, the tax rate was in excess of 3% of the appraised value of a home and the appraised value was escalating at unheard of rates in those days. Retired people and even working people at all levels were getting hit with escalating real estate taxes.
Let me give you an example of my neighbor in Westwood. He was in his late 70s early 80s. A song writer of some success in writing music for movies. He lived on small royalties which he received and social security. He had bought his house for around $39,000 when it was built. His appraised value had climbed to $150,000 and his tax exceeded $4,500 per year. He told me he was afraid he was going to lose his house.
After carefully studying Props 8 and 13, I reluctantly concluded I had to vote for Prop 13. It established the base tax at 1% of 1978 appraised values and was limited to a 2% annual increase plus a share of bond payments which had been approved with a 2/3rd approval rate. My neighbor lived out the rest of his life in his home until he had to go to an extended care home. Without Prop13 he would have lost his home.
All home owners benefited from Prop 13 as they knew how much their tax was going to be in the first year and in following years. This is important for people at all levels of income.
One of the big complaints one hears today, and it appeared in a recent Steve Lopez Column, is by people who buy a house and have to pay real estate taxes at 1% of the purchase price of the house. They claim this is unfair as they may be paying $10,000 on their million dollar house but their neighbor may be paying $2,000, or even less, on the house next door with the same value. However, the person who bought the home for $1 million factored in the $10,000 per year in tax into their budget, while the person next door may have a limited income and can’t afford any more than $2,000. On the other hand the people next door may in fact be rich, and could afford the higher tax, and are they not lucky.
Next let’s deal with commercial real estate that share in the break from Prop 13. If the tax on commercial real estate was not limited who would pay the increased tax, the owner of the property or the tenants? In the majority of cases it would be the tenants as most leases call for a pass through of the real estate tax increases to the tenants. As it is commercial properties are turned over fairly regularly and the taxes are increased. Yes some commercial properties are not sold and they may have long term leases that limit the landlord’s income. The office building my firm is located in has been sold three or four times in 18 years.
Are there things wrong with Prop 13? Without a question. However, if we allow elected officials to mess with the contents of Prop 13 we have no idea what the final revised law will look like, and personally I don’t want to take that chance. (Harold Katz is a long-time public transportation activist and a contributor to CityWatch.) ◘
CityWatch
Vol 6 Issue 65
Pub: August 12, 2008
|
