Leonard Letter Articles on Property Taxes – 2004-2008
“CTA and Reiner Withdraw Initiative After Error Found” – April 12, 2004
The following illustrates why we should always look beyond titles and read what we are voting on. Jon Coupal, president of the Howard Jarvis Taxpayers Association, joined by anti-tax activists Joel Fox and Greg Turner, pointed out a drafting error last week in the "Improving Classroom Education Act" that could have lead to every homeowner in California to experience a 55% increase in the land portion of their property taxes. Although the initiative's had language that specifically said its intent was to only raise commercial property taxes and not the property taxes paid by homeowners, a judge could have drawn a different conclusion because of the drafting error.
How much of a tax hike for homeowners might this have resulted in? According to the Board of Equalization’s research section, the total assessed value all single family residential property California in 2002-03 was slightly over $1.5 trillion. Of that, $636.4 billion is the assessed value of the land. One percent of $636.4 billion is about $6.3 billion. Fifty-five percent of this is about $3.4 billion, which would be the potential tax increase on California homeowners if the initiative had passed. On Friday morning, the CTA and Rob Reiner announced the withdrawal of the initiative. Kudos to Jon Coupal, the Howard Jarvis Taxpayers Association, Cal-Tax, and the Small Business Action Committee for pointing out this drafting error and continuing to fight for California’s taxpayers. Even if the initiative would have only resulted in a tax hike on commercial property, it would most certainly have made California less competitive and stifled our recovery.
“Senior, Disabled and Blind Property Tax Postponement” – May 10, 2004
Beginning May 15, qualifying seniors, blind and disabled homeowners may file an affidavit with the State Controller’s Office to postpone payment of part or all of the property taxes on their residence. To qualify, homeowners must complete a claim form and submit it to the State Controller's Office. If the claim is approved, certificates of eligibility are mailed to the homeowner. The homeowner must mail or take the certificates to the county tax collector's office to postpone the property taxes due. To secure the postponed amount, a lien is recorded against the property. Interest is charged on the postponed taxes on a simple interest basis. The postponed amount and interest are not due until: (1) you move from the qualified property; (2) you sell or convey title to your home; (3) you die and do not have a spouse or other qualified individual who continues to reside in the home; or (4) future property taxes or other senior liens are allowed to become delinquent. However, you may pay all or part of the obligation before it becomes due. For more information on eligibility, the program and a claim form, visit http://www.sco.ca.gov/col/taxinfo/ptp/index.shtml.
I realize that some people may need help in completing the forms. If you need such assistance, or know of someone who does, please contact my office at (916)445-2181 and my staff will be happy to help or direct you to a community-based resource that can do so.
“Property Rights and Your Taxes” – August 8, 2005
Senator Tom McClintock and Assemblyman Doug LaMalfa have introduced constitutional amendments that will require quick action when the legislature returns from its summer recess if it is to make it before the voters this fall. The proposals are a reaction to the recent Supreme Court decision that substantially voids private property rights in the name of economic development. The Howard Jarvis Taxpayers Association says that Californians in particular should worry given that cities might lust after the potential increase in property taxes that could be generated if property protected under Prop. 13’s lower tax rates is condemned and replaced with new development that can be taxed at higher values.
In truth, California’s eminent domain and redevelopment law already permit the kind of property taking that the Supreme Court recently permitted in the Connecticut case. However, the debate over the decision has raised awareness about property rights and made many people rethink whether their homes are safe. SCA 15 and ACA 22 are thus attempts to give homeowners the protection they already thought they had, and such protection is overdue in California. However, these particular measures need additional work. I have heard concerns that the current language would impede privatization and public-private partnerships. Property rights must be protected, and the government must have the ability to obtain property that is needed for valid public uses, including those that might fall under the definition of privatization or partnerships. I encourage Senator McClintock and Assemblyman LaMalfa to continue working on this issue.
“Headlines Lie” – October 2, 2006
We all know of story
headlines that are funny or embarrassing as they have been fodder for late
night comedy shows for decades. We also know that headlines can
mislead. I would add that they also can be totally false. Of
course, reporters do not write headlines and often do not see them until they
open the paper after its printed, so the problem lies with editors. An
example this week made me wonder if I was at the same meeting.
The Contra Costa Times published a story by Rick Jurgens that summarized
the Board of Equalization’s lengthy process of rule making. The headline
read “Oil refineries lose bid to lessen taxes.” The truth is that oil
refineries opposed a bid to increase their taxes. The headline was not
even close to being accurate or fair.
In these times of high gasoline prices, it could be galling for oil refineries
to not pass along some share of that wealth in the form of property
taxes. That is, if that was what they were doing. But in these
times of high gasoline prices for oil refineries to fight efforts by County Assessors to raise their taxes and their prices is much more a justified defense of
their companies and their customers.
If readers stopped at the headline they would learn that the evil oil companies
are pretty greedy. But if you read the story carefully you would come
away asking why government always seems to want to raise people's taxes.
And the mainstream media wonders why the public trusts them less and less.
“You Can Question Your Assessment” – May 14, 2007
I recently had an experience
with property tax assessment that reinforced the importance of asking questions
when you think something is amiss with your tax bill. Last year, I added
a room on to my house. When my property tax bill arrived, the new
assessment seemed excessive – as if the entire house had undergone
reassessment. This did not jibe with my memory of how we implemented
Proposition 13. So I double-checked and it turns out that the assessment
was in error and statute is clear.
Because I wanted to be sure and because I know a lot of people are making home
improvements, I asked for a legal opinion from BoE staff. I posed the
question: “When a county-assessed property owner makes an improvement to
an existing house, is the assessor required to increase the property’s assessed
value by the value of the improvement only? The answer came back in the affirmative. This
is fair to property owners and was part of the original 1979 implementation of
Proposition 13.
“Office of
Administrative Law Overturns Awful Regulation” – June 18, 2007
I am pleased to report that on June
8, the Office of Administrative Law (OAL) killed a terrible regulation that had
passed out of the Board of Equalization on a 3 to 2 vote in September.
OAL was created three decades ago to prevent state agencies from promulgating
arbitrary, unnecessary, unauthorized, and conflicting rules and
regulations. Unfortunately, many are unaware of this office because it
has rarely lived up to its promise. I am grateful that Governor Schwarzenegger
cleaned house and OAL is performing its duty.
The overturned regulation, Property Tax Rule 474, would have created a special tax rule for petroleum refineries that would have treated them differently from all other refineries and factories. Rather than implement state law, this poorly-drafted and incomprehensible rule violated the law. Its sole purpose was to increase taxes on refineries, which could only have led to higher gasoline prices. Despite two years of meetings, the proponents were never able to point to a single refinery in California that was under-taxed under the existing rules. Thus, the rule sought to solve a non-existent problem with an unfair solution that would have treated similarly-situated taxpayers differently, complicated tax administration, confused taxpayers and assessors, increased errors and appeals, and created the impression of favoritism and corruption.
Three cheers for the Office of Administrative Law!
“Helping Homeowners and Renters” – July 16, 2007
From now until October 15, eligible Californians may apply for the state’s Homeowner and Renter Assistance Program, which provides rebates on property taxes. Qualified homeowners can receive a maximum of $472.60 for the 2006 tax year while renters can receive up to $347.50. To be eligible, a homeowner must be a United States citizen, designated alien or qualified alien; have owned and lived in their home as of December 31, 2006; be 62 years of age or older, blind, or disabled; and had a total household income of $42,770 or less. For renters to qualify, they must also beUnited States citizens, designated aliens or qualified aliens; live in a qualified rented residence in California (i.e., the owner of the residence must have paid property taxes on it); be 62 years of age or older, blind, or disabled; and had a total household income of $42,770 or less. If you have a family member, friend or neighbor who might qualify, please bring this to their attention so they do not miss out on getting some of their tax dollars returned to them.
Claim forms, instructions and links to organizations available to help people fill out the forms are available from the Franchise Tax Board here:
http://www.ftb.ca.gov/individuals/hra/index.html
“Williamson Act” – July 23, 2007
One of the controversies in
last week’s state budget debates was eliminating state funding to counties
under the Williamson Act. Such a cut was not included in the version of the
budget that passed (as of this writing), which pleases me. Consider this
history: the act was named for Assemblyman
John Williamson a Democrat from Bakersfield, it is one of the first of the
successful property tax cuts. That’s right: a Democrat pushing a big tax
cut! In the mid- 1960s farmers were being taxed out of their farms
because County Assessors were assigning land values to the farms as if the land
was being sold as residential lots. Williamson's solution, which took
several years to get passed, had two parts. The first part was very conservative.
He authorized farmers and governments to sign contracts with the farmer having
total freedom to choose whether to sign. The contact would have the
farmer give up rights to develop the land as anything other than a farm and in
return the county agreed to tax the land only as a farm. The contracts
had to run for at least 10 years and if the farmer cancelled the contract then
catch-up taxes became due.
The second part is the state subsidy that is controversial today. The
counties cried poverty, even though they were providing minimal services to the
farmer or his land, but Williamson agreed to have the state pay the counties
for their lost property taxes. In those pre-Proposition 13 days the
counties were raising more and more revenue without raising tax rates and they
had come to depend on this revenue growth, even from farm lands.
Now that Proposition 13 protects all property owners including farmers, some
argue that the Williamson Act is no longer useful. Certainly the property
tax pressure on farmers is not as great today as it was then, but the urban
encroachment on farmland continues and the Williamson Act has proven to be a
useful tool for preserving agricultural land. Farmers can freely sign
contracts and can sell their farms subject to these contracts. These
contracts keep property taxes low for them. Counties are held harmless,
which is the needed incentive to make them sign and honor the contracts.
My concern is that if the Williamson Act is abolished the counties will revert
to the liberal method of getting their way. They will tax farmers every
time the farm is sold and will pass zoning and development restrictions that
will prevent the farmer or ex-farmer from ever getting that value for their
property. That type of force is a Kelo-like imposition of government, and
I prefer the free and willing contracting approach.
“Tax Reduction Deadline” – November 26, 2007
California property values are not skyrocketing at the moment.
At the best, they are remaining steady, but in many areas of the state, they
have declined. California voters approved Prop. 8 in November 1978 that allows
for their property taxes to be reduced when the market value is lower than the
factored based year value for that year. Each county assessor has the authority
to undertake such informal reassessments at the request of the property owner.
The great thing is, you do not need a formal appraisal to make this
application. You include your estimate of the property’s value, and you can
come up with that number based on finding comparable sales in your
neighborhood. Many an internet site is available to give you an idea of those
figures.
The “Informal Request for the Decline in Market Value Reassessment” is a simple
one page document unique to each county and each county has its own deadline.
(Some of which are on December 31st.) To get the details on your county, go to
your assessor’s website or call. You may find a list of county assessors at
this site:
http://www.boe.ca.gov/proptaxes/assessors.htm
This is not an official reassessment of your property, although you may want to
consider that process if property values continue to decline in your area next
year. In that case, you will want to file a property appeal for the 2008/2009
tax roll year. You will need to file an “Application for Changed Assessment”
form with your county Assessment Appeals Board by September 15, 2008.
Property Tax Assistance for People Who Pay No Property Taxes? Only in California! – May 12, 2008
With the catastrophic budget deficits facing California, we need to find programs to cut or eliminate. In that spirit, I offer the Homeowner and Renter Property Tax Assistance Program as a prime candidate for elimination.
This misnamed welfare program was created almost four decades ago to help keep elderly homeowners from being thrown out of their homes because they could not afford to pay their ever-growing property taxes. In the days before Proposition 13, property tax increases were unpredictable and unlimited. The Legislature refused to limit tax increases, and instead created a new welfare program to send direct payments out of the State Treasury to help homeowners pay their tax bills. The payments have never had any real connection to property taxes, since the funds can be used for any purpose and claimants receive the handouts even when their property taxes are delinquent. The entire program should have been repealed or modified when Prop. 13 passed in 1978, but Leonard Letter readers know that government programs are the nearest thing to immortality that we have on Earth. Instead of repealing the program, it has expanded dramatically.
In 1977, the Legislature made the Homeowner and Renter Property Tax Assistance payments available to renters, most of whom pay no property taxes. Shortly after the passage of Prop. 13, the Legislature also created the income tax credit known as the Renter's Credit. Instead of eliminating the redundant property tax assistance program, the Legislature has actually expanded it. Now the program hands out around $41 million to homeowners and around $150 million to renters. Currently, about four-fifths of payments are made to renters, rather than homeowners. Nearly all the appeals heard by the Board of Equalization come from renters who do not pay property taxes. Only in California would the government spend hundreds of millions of dollars paying for property tax assistance to people who pay no property taxes!
In addition to the cost of the direct payments, the Franchise Tax Board bears the expense of approximately 30 full-time employees required to administer this program, plus an additional 100 temporary employees hired each year for the filing season. For the 2006 claim year, there were 621,989 claims filed. Of those claims, 594,622 were paid and 23,693 were denied in full. Of those denied, 425 appealed for the 2006 claim year and 85 appealed for prior years. The Board of Equalization has several staff attorneys in the Appeals Division assigned to review these appeals.
In order to qualify for Homeowner and Renter Property Tax Assistance, a person must be at least 62 years old or disabled. The total household income for recipients is currently limited to $42,770 or less, but the program does not take wealth into account. That means that a person who owns a million-dollar home and a million-dollar stock portfolio can still be eligible for these welfare payments if his or her net income fell below the threshold in the prior year. A hard-working poor person under age 62 who does not meet the disability requirement gets nothing at all. In fact, such workers may be paying higher taxes to subsidize much wealthier people.
Of course, there are many poor people who have great difficulty paying their property taxes. It might be reasonable to expect the Legislature to find some way to assist those people, but the Legislature has already done that. The State Controller has long administered a program known as Property Tax Postponement for Senior Citizens, Blind or Disabled Citizens, which allows eligible homeowners to indefinitely postpone paying their property taxes until they sell their property. Interest on the unpaid taxes accrues at a low annual rate of 5%, but the interest is also postponed indefinitely until the property is sold. It makes no sense for our state to offer the Homeowner and Renter Property Tax Assistance Program when the Property Tax Postponement program is available as a more reasonable alternative for the same group of homeowners.