Proposition 5: California Realtors Seek Property Tax Breaks for Seniors

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Four decades ago, Californians passed Proposition 13, which amended the state constitution to limit property tax rates. It set tax rates at 1 percent of a home's sale price and capped yearly increases at 2 percent.

Businessman and anti-tax activist Howard Jarvis spearheaded the campaign for Prop 13.

"The most important thing in this country is not the school system, nor the police department nor the fire department, it's the right to preserve the right to have property in this country, the right to have a home in this country," said Jarvis said at the time.

In an opinion piece marking Prop 13's 40-year-anniversary for the L.A. Times, writer Conor Friedersdorf expounded its shortcomings. He contended it's now clear in hindsight that near-frozen property taxes led local governments to favor commercial development, seeing residential development as a liability.

Proposition 5, authored and placed on the ballot (through signatures) by the California Association of Realtors, will expand the benefits of Prop 13—for some homeowners.

Under the current system, many homeowners over 55 are eligible for property tax savings when they move to a new home of equal or lesser and within the same county as their previous home. They can only benefit from this with one move, however.

Prop 5 will let beneficiaries take their property tax rates from one home to another. This means those who have lived in their homes for many years and thus have very low property tax rates – thanks to Prop 13 – get to maintain those low rates.

Related: A Guide to the Propositions on the Nov. 6 Ballot in California, From the Gas Tax Repeal to Daylight Saving Time

Voting “yes” means letting all homeowners over 55 (or those who meet other conditions, such as having a severe disability or being the affected by a natural disaster) pay lower property tax rates when they sell a home and buy a new one — regardless of their new home’s market value or where they relocate in the state.

Property tax revenues that specifically go to schools and local municipalities will be reduced by about $1 billion a year if the measure is passed, according to a state analysis.

Voting “no” means the current property tax system will remain the same.

Supporters – The San Diego Union-Tribune concedes real estate agents came up with Prop 5 to make profit, but says “it’s actually a smart idea” that will free up property, which can help improve California’s housing market.

Opponents – The Service Employees International Union’s California chapter calls Prop 5 “a boon to the real estate industry that comes at the cost of massive cuts to schools.” The California Teachers Association also opposes the measure.

The editorial boards for the L.A. Times, the San Francisco Chronicle and the Sacramento Bee disapprove of Prop 5 as well.

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