EVERYTHING YOU NEED TO KNOW: BALLOT MEASURE 5
5: Portable Real Estate Tax Break
What it would do:
Allow older or disabled homeowners to take a portion of their lowered property tax base with them if they sell their home and move.
If you want to get into the weeds, here’s how it works: someone who buys a more expensive house would no longer be required to pay property taxes based on the full market price of the new home, as they would be now in many cases. Instead, the new taxable amount would only increase by the difference in market price between the new and old home.
Likewise, someone who moves to a less expensive house would actually see their property fall, dodging a higher property tax bill based on the full market rate of the new property. Instead, their assessed value would decline by the percentage difference in price between the new and old property.
What it would cost the government:
According to the Legislative Analyst’s Office, the state’s nonpartisan budgetary scorekeeper, local governments and school districts would lose $2 billion annually ($1 billion each) in foregone tax revenue. The state government would be required to backfill most of these costs, increasing state spending by a roughly equivalent amount. Some school districts in areas with high property taxes (roughly 5 percent across the state) would not be made entirely whole.
Why it is on the ballot:
Ever since voters passed Proposition 13 in 1978, property taxes have been calculated based on a home’s purchase price, rather than its current market value. That has kept property tax bills low for longtime homeowners despite skyrocketing real estate prices, but it also discourages people from moving, since property tax assessments are usually reset when you buy a new home. The California Association of Realtors, the folks in the business of selling homes, introduced this ballot measure last fall arguing that it will free up necessary inventory for young families by making it easier for empty nesters to downsize.
Story Credit and Breakdown of Propositions: CalMatters.Org