Real Estate Round-Up: Proposed initiative not only benefits seniors but fire victims and disabled too

Earlier this year, I reported that the California Association of Realtors was sponsoring a tax initiative for the November 2018 General Election. As an association, we tasked ourselves with collecting the 800,000 signatures needed to qualify it for the ballot.

After the article, many of you came by my office to sign the petition and I continued to collect more signatures at various community events. I am happy to announce that we gathered over 1,000,000 signatures in the state of California. To give you some perspective, the initiative to repeal the gas tax has only garnered just over 600,000 signatures – and I’m pretty sure everyone of us would like to roll back gas prices.

We have renamed the initiative to the Property Tax Fairness Initiative and it will now also help disaster victims (like those affected by the massive fires we have had state wide this year), as well as the severely disabled. Nobody should be penalized on the tax front due to their circumstances. That’s just not right.

Far as seniors go, many of us Realtors spoke with homeowners age 55 and older who shared stories of how they felt they could not move because, since they’re on fixed incomes, they cannot afford any increases in property taxes. As I reported earlier, almost 75 percent of homeowners 55 and older have not moved since 2000. This initiative will provide a way for them to move and not be financially penalized for it.

But make no mistake about it – unfortunately there are groups who will actually oppose this initiative. Sad but true. Let me tell you why. When an initiative is prepared for petition, it goes to the State where a “title and summary” is created. This is the description you see when you receive your voter booklet. It describes the initiative and then it applies a “cost” to the state if the initiative passes. This is where it gets tricky.

The State does not do a dynamic analysis. They only look at what is lost, not what is gained. I just learned this, so you better be aware when you read your booklet, remember that if the initiative has any positive financial gain it’s because it’s a new tax or assessment and while that’s revenue for the State, it’s a cost to us.

But I digress. So, currently as an example: if you are a homeowner who is 55 or older and you sell your home for 600,000 but have a tax basis on $350,000, you will take that tax basis with you and you can purchase a home for up to $600,000 in 1 of 11 counties in the state and that county will only collect taxes on that new home as if it was worth $350,000. So, for that county, it could be perceived to be a loss.

But what about the person who buys your home for the $600,000? Remember, you were paying taxes as if it was worth $350,000 and now they are paying taxes on $600,000. That is a win for that county, right? But looking at your voter booklet, that initiative’s “title and summary” would show it to be a financial loss. There’s a floating negative and positive financial equation for every initiative but in the booklet sometimes only one is reflected, so keep reading.

Under the new Property Tax Fairness Initiative, using the same scenario above, if you purchased a home for say, $800,000, your $350,000 tax basis would only apply to the first $600,000 because that is what you sold your home for. Then you would pay additional property tax on that $200,000 difference. That is called a blended tax basis.

Remember with the new plan you can buy/sell and carry your tax basis anywhere in the State as many times as you please – as opposed to the one-time restriction we all have now. So if you move when you’re 60 to be closer to your grandkids, and then when you’re 76 you decide it’s time to move to Palm Springs, you can! If seniors are financially freed up to move, then their homes are available for younger people and families looking to buy those homes. And, as we’re all acutely aware, we have a historic housing shortage.

So beware the groups who oppose this initiative. They will be trying to convince you that it is a financial hardship on the State. Be prepared to stand up for this common sense and compassionate initiative. Don’t be fooled by overly dramatic commercials that tug at your heartstrings then tell you why it’s bad for the bottom line. If you’re more concerned with your own bottom line (I know I am), vote for Property Tax Fairness Initiative in November.

Kim Murphy can be reached at [email protected] or (760) 415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.