[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But fundamentally, I believe Props 58 and 193 should be repealed, as they are NOT in keeping with the original intent of Prop 13, which was to keep seniors from being taxed out of their homes.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.
