[quote=bearishgurl][quote=CA renter]BG, I don’t even think we need to worry about the inherited aspect of Prop 13, as long as it was for a **single primary residence,** but do think that we need to allow people to EITHER:
-retain the Prop 13 basis and disallow the stepped-up cost for cap gains upon sale
OR
-allow the heirs to step up the cost basis for cap gains, and use this value for property taxes.
It has to be one or the other. It is totally wrong that heirs get to use their ancestors’ cost basis for property taxes, and then use the stepped-up value for cap gains…[/quote]
I agree with this, given the current realities.
But fundamentally, I believe Props 58 and 193 should be repealed, as they are NOT in keeping with the original intent of Prop 13, which was to keep seniors from being taxed out of their homes. An able-bodied young parent with minor children (heavily using public school services and all other local services) can ostensibly “inherit” a primary residence and in doing so “inherit” the same assessment (+2% snnually) of the parent/grandparent who left it to them. They often have the means to pay the tax based upon the stepped-up basis upon death being equal to the *new* assessment … but … they aren’t required to and never will be as long as they own the property. It’s a “loophole” which amounts to unjust enrichment (to varying degrees) at the expense of similarly-situated taxpayers who purchased their properties after April 1978. This “loophole” will go on into perpetuity and will have the effect of keeping the vast majority of CA’s most valuable and best-located properties off the market. There is LITTLE TO ZERO INCENTIVE for these longtime owners (or their heirs) to EVER sell … unless they have no heirs to leave their property to or none of them want the property upon their deaths (rare).
A Prop-13 protected tax bill for a ~1600 sf SFR in a “working class” area of SD was currently about $368 at the time of a 2011 death. 1.02 x $368 = $375 (heir’s tax bill for 2012) …. and so on. Their assessments are coming from such a low floor that it will likely never come close to hitting their property’s fair market value in their lifetimes!
The fallout of Props 58 and 193 have had the unintended consequences of severely reducing CA’s city, county and school budgets and Teeter funds (which run the courts and prisons), and are/will be playing a HUGE role in eventually bankrupting our state!
This problem, created by our (misguided) Legislature in the 80’s, is not small. A HUGE AMOUNT of property owners have availed themselves of these perks and will continue to do so with nearly every death of a longtime CA property owner.
Prop 13 (as it applies to the original owners who still own the same property today, will eventually become moot with the deaths of its last beneficiaries (approx 2040), assuming Props 58 and 193 are repealed.
Repeal of Props 58/193 would go a long way in getting CA out of the fiscal “black hole” it has managed to get itself into, IMO.[/quote]
Maybe I’m missing something, but the people who inherit from parents who bought after 1978 also benefit from Prop 13. Why is it important that the property be purchased before 1978? Aren’t the benefits the same for every home buyer and their heirs, whether or not they buy before or after 1978? Am I missing something?
Personally, I have strong beliefs about private property rights, especially WRT property that is for personal use, like a single primary residence. Like spdrun mentioned above, I think that property taxes on personal property should be very low or non-existent (up to a limit).
While I understand your arguments, I think that we could fix the budget problems by eliminating the benefits for corporate entities, owners of large tracts of land over a certain size and within certain zones, investors, etc. Prop 13 was about preventing people from being taxed out of their homes by capping increases at 2%/year. I believe this is the right thing to do, whether the person is the first owner or an heir. In the cases I know where the heir moved into the parents’ properties, they were not rich, and could not have afforded the higher property taxes. Again, if the heirs are not living in these homes as a primary residence, then they should lose the Prop 13 protection, IMHO.
Also, FWIW, most of the people I know who’ve inherited homes tend to sell them because they are not willing to maintain these homes (usually much older and in need of a lot of repairs), and they just don’t want to be landlords. More often than not, there are multiple heirs, and they usually end up selling the house. These days, most kids live away from their parents, so they don’t want to live in their parents house, which would make the inheritability of Prop 13 moot if we were to move to the system I’m advocating for.
