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Jan. 15, 2021 - Epoch Times
19:47
Unveiling California’s Misleading Prop 19 | Jon Coupal
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Prop 19 passed and there was a good side to it and there was another side to it that it will increase taxes on people that are homeowners.
Can you tell us more about this proposition?
Well, what has happened after the election?
People are now waking up.
We're a month after and our phones are still ringing off the hooks from people are saying, I didn't know about this.
Nobody told us that this was happening.
And what's going to happen next?
A lot of people are looking at their estate planning and say, we want to give our property, our home or business to our children, our grandchildren now before February 16th.
Because if they do that, they will be grandfathered in under the old rules.
Now, how can the average voters in California that see these propositions and that's going to affect them, how can they find more about them and not get deceived by the money spent and the advertising that's spent on them?
At the end of the day, the citizens of the United States are supposed to be the boss Over our elected officials.
The reality is we elect them.
So it is very important for every voting citizen in California to become exceptionally well educated as to what the issues are.
California voters recently passed Proposition 19, allowing residents to transfer their property tax break.
However, it repealed the ability to transfer real estate tax breaks within families, which could result in a $1 billion tax increase for California residents.
My guest today is John Coppell.
He's the president of the Howard Jarvis Taxpayers Association.
Today, he discusses the impact of Prop 19 passing And how residents can avoid its tax consequences.
Welcome to California Insider.
John, it's great to have you back on.
Welcome.
It's good to be here.
Thank you for having me again.
And we want to talk to you about Prop 19 today.
Prop 19 passed, and there was a good side to it, and there was another side to it that it will increase taxes on people that are homeowners.
Can you tell us more about this proposition?
Sure.
This was a proposition that was sponsored by the California Association of Realtors, and we did oppose it.
We've been on the same side as the realtors in other cases, but not this time.
This particular proposition did something very good, and it did something very bad.
And we just felt that what it did that was bad was outweighed the good part.
For people to understand Proposition 19, they have to understand a little bit about Prop 13.
Prop 13 limits your property taxes to a 1% rate cap and also limited the annual increases in taxable value to 2% a year.
The problem was shortly after Proposition 13 passed in 1978, people realized that when they gave the property to their kids, they would be hit with a massive reassessment to full market value.
Because of that, there was a Proposition 58 that was passed in the early 80s that simply said that if your parents or grandparents were protected, By Proposition 13, that that protection would extend to the children and grandchildren.
So that was a very important protection that was consistent with Proposition 13.
It wasn't exactly Prop 13, but it certainly allowed people to enjoy Prop 13 if they inherited property from their parents or their grandparents.
The other problem with what was going on with Proposition 13 was When people move to another county and bought a new house, because property is reassessed when it changes hands, people were seeing a huge increase in their property taxes if they moved to a new home.
Well, that kind of makes sense.
So the legislature, with some initiatives, said if you move your primary residence within the same county, And it is a property of equal or lesser value, you can take your reduced base with you.
And you can move it to another county if that county has an agreement with the county that you live in to provide what we call reciprocity.
The problem was, out of California's 58 counties, only 11 counties had reciprocity agreements.
So that severely restricted the ability of people to sell their homes and take their Prop 13 base with them to another county.
So that's the good thing that Prop 19 did.
Prop 19 said, no matter where you live, you can take your Prop 13 base with you to any place in California And you were also no longer restricted to buying a home of equal or lesser value.
You could actually buy a home of greater value and take a proportional protection with you to the new residence.
That was the good part of Proposition 19.
The bad part was taking away what we call the intergenerational protection.
The intergenerational protection was Being able to protect your children and grandchildren from a huge increase in taxes if they are given property by their parents and grandparents.
And that amounted to about a billion dollar tax hike.
Now, here's the thing that's so interesting.
The realtors were able to spend a lot of money on this campaign, and because we were so focused on another initiative that was really more of a direct threat to Proposition 13, we did not spend hardly any resources trying to defeat 19.
And the Realtors spent, I believe, about $50 million against really not much opposition in terms of money.
So even with everything that they did, it still only barely passed.
And what we found most offensive about that campaign was that they never mentioned the bad part of Proposition 19.
They never mentioned that they were getting rid of that intergenerational protection.
Well, what has happened after the election?
People are now waking up.
Our phones are still, what are we?
We're a month after the election, and our phones are still ringing off the hooks from people who are saying, I didn't know about this.
Nobody told us that this was happening.
So there's a lot of controversy, a lot of fear and anxiety involving Proposition 19 and how the loss of that intergenerational protection is going to impact people going forward.
So that's what we're dealing with right now.
And what's going to happen next?
So the Prop 58, that's gone, right?
So now what's next?
Well, a couple of things.
There's how people are going to react to this, and then there's the political reaction.
How people are reacting to it right now, and this is something I want to make very clear.
The Howard Jarvis Taxpayers Association, we cannot give specific advice to people who want to give their property to their children or grandchildren.
The reason we can't give specific advice is because everybody's estate planning is different.
For example, Prop 19 will become effective on February 16th.
There are a number of people who are trying to beat the deadline, and it may make sense for them to do that.
And what do I mean by beating the deadline?
What I mean is a lot of people are looking at their estate planning and say, we want to give our property, our home, our business to our children, our grandchildren now before February 16th.
Because if they do that, they will be grandfathered in under the old rules, the pre-Prop 19 rules, the Prop 58 rules, which are more beneficial.
However, if they do that, there may be additional complications.
For example, there may be capital gains implications that may not make that advantageous for everybody.
So what we are advising is that People talk to their estate planners, their estate attorneys, and try to figure out what's best for them.
But certainly an option is, again, under the advice of your own lawyer, an option is trying to make those transfers immediately before February 16th so that transfer is protected under the old rules.
That's what's going on out there in terms of people's reactions.
We're getting calls from the state attorneys as well.
And there have been a number of webinars from different groups.
And the Board of Equalization, California's state agency, which deals with property tax issues, has issued directives.
And so I would advise your viewers, if they want, they can go to the Board of Equalization.
All they would have to do is go Google California, Board of Equalization, Prop 19.
And there's some very good, simple explanations in that that may be helpful.
So we would advise them to do that.
Now, politically, politically, what are we going to do?
Good question.
We are sensing a significant political backlash against Proposition 19, again, because people were unaware that the realtors had a heavily financed campaign, It was a very deceptive campaign that did not explain to taxpayers what was going on, and it was taking away a key protection for property owners.
So there is a pretty sharp backlash against Prop 19.
Now, the question is, is there enough of a backlash to reverse Proposition 19?
So what the Howard Jarvis Taxpayers Association is going to do very shortly is we are going to try to reintroduce, to find some friendly legislators to reintroduce, basically, Prop 58 from back in the early 80s.
In other words, just bring back the old rules as it relates to these intergenerational protections.
I think they'll be pretty simple.
It's simple in terms of how to riot it.
Politically, we don't know what the reaction is going to be.
We suspect that a lot of legislators are hearing from their constituents that they're pretty angry that they lost Proposition 19.
So we may get some traction in the California legislature to move forward.
Now, there are some significant hurdles to doing this.
The biggest hurdle is we would have to do this with a constitutional amendment.
And in order for the legislature to put a constitutional amendment on the ballot, it will take a two-thirds vote of both the California Assembly and the California Senate to put on the ballot.
That is a pretty heavy lift.
So is it possible?
Yes, it is.
We will gauge the temperature of California's political leaders to see if they're willing to do this.
If not, that may be the first step And a potential initiative, because there may be an initiative of which we would probably be at least partners to try to bring this back.
Now, before people say, oh, good, Jervis is going to come right into the rescue, I want to stress that we have not committed to doing an initiative.
There are a number of other very high-priority Things that we want to do with the state constitution to reinvigorate taxpayer protections.
We're losing some cases in the California courts right now.
We want to reverse those.
So we have to assess whether trying to reverse Prop 19, where is that in our priority list?
And of course, we will be reaching out to our traditional coalition partners, like the business community, to see what they want to do, because I think What happened with the defeat of Proposition 15, which was a huge victory for us,
but it showed that when taxpayers from across the spectrum, whether they're Republican, Democrat, big business, big corporations, small business, homeowners, small business, farmers, that when we act together, we can really get some good things done.
So these are the things that we're going to be talking about going forward.
Now, when a proposition like this goes on the ballot, how can it be that gets promoted like that, when you see the good sides are promoted and then the bad sides are completely hidden?
Well, regrettably, there was a well-known saying from a former treasurer of California who was one of the most powerful politicians in California, For many, many years.
He was extremely powerful.
And nothing got done in Sacramento without his say-so.
His name is Jesse Unruh.
And he had a very famous saying.
He said that money is the mother's milk of politics.
And it's quoted all the time.
In fact, it's quoted at the national level as well.
The sad reality is that if you have a ton of money...
You have a leg up on whatever it is you want to do.
And that's what happened here.
Again, the Realtors had about $50 million.
We spent probably less than $15,000 or $20,000 trying to oppose it.
We had some lawn signs and that was about it.
We spent a lot of money trying to defeat Proposition 15 and we were successful in that fight.
And on that fight, both sides The yes on Prop 15 side and the no on Prop 15 side had about the same amount of money, about $65 million each.
That was a campaign that at the end of the day cost more than $150 million, but it was equally divided.
So when you have equal resources, you have a better chance of making sure that your message is getting out.
But if you go into A political battle with no money, either as a candidate or as an initiative, you don't have, you know, it's a lot harder.
That's not to say it can't be done.
Remember that Proposition 13 back in 1978 was virtually an all-volunteer effort.
So sometimes money doesn't dictate results.
And also money doesn't dictate results with political candidates.
California has seen a string of very wealthy millionaires and billionaires running for state governor and get crushed.
We've seen that over again.
But, again, the bottom line is money is very important in politics.
That's just the way it is.
It's true of the United States.
It's probably true everywhere else, too.
Now, how can the average voters in California that see these propositions, and that's going to affect them, how can they find more about them and not get deceived by the money spent and the advertising that's spent on them?
Well, first of all, that is a great question.
And that is, look, at the end of the day, the citizens of the United States are supposed to be the boss Over our elected officials.
Sometimes the elected officials, like we see here in California with a governor who is issuing dictatorial orders about how we live our lives, the reality is we elect them.
So it is very important for every voting citizen in California to become exceptionally well educated as to what the issues are.
And that includes when there are measures on the ballot, everybody needs to do their homework.
You have to determine who are the sources you trust.
In California, if people are interested in their rights as taxpayers, they rely on the Howard Jarvis Taxmen's Association.
Now, if you're a doctor, you rely on the California Medical Association.
People have to choose those sources of information that they deem trustworthy for them.
And if people, again, there are a lot of sources out there, people should pretty much ignore political ads and take any paid political ads with a huge grain of salt.
You know, if you get a slate mailer in the mail that says, here are the things that you should vote for, well, who's putting that out?
Figure out who it is.
Is it a source that you trust?
Is it a source that is trustworthy?
So people need to do their own homework, and I will say this, in the ballot pamphlet itself, There is a description of the initiatives.
Now, there are arguments pro and against.
Those are not objective.
You know, if you're against an initiative, I'm going to write a very critical analysis of what I'm for an initiative.
I'm going to write something that's very much in favor of it.
But there is some information that's supposed to be objective.
And the information that is prepared by the legislative analyst, California has a legislative analyst, It's usually pretty objective.
Now, not always, but they are usually more objective than your elected politician.
And I would say I would also ignore what's considered the official title and summary and the ballot label because the Attorney General writes those in a way that's very favorable to one side or another.
If you're going to rely on the information in a ballot pamphlet, I think the most objective material in the ballot pamphlet is whatever the legislative analyst prepared.
That's usually right underneath the title.
Thank you so much.
Do you have any other remarks?
No, I think people need to be very cautious.
Again, if you think you're impacted by Proposition 19, we very much advise you to contact your estate attorney to figure out what the rule is.
And again, we provide a lot of resources on our website, which is hjta.org.
If you're a California taxpayer and you want to become more educated on taxpayer issues, please go to our website.
We have a lot of information.
But I appreciate you inviting me today.
Thank you so much, John.
It's great to have you.
Thank you.
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