AARP SIDES WITH GOVERNMENT OVER RETIREES
If the fish that I’m currently dipping in tartar sauce had known that a sharp hook was hidden inside the fly floating on the sunny surface of the water, he would not have swallowed it.
Proposition 19, which appeared on the November 2020 statewide ballot, is another example of unsuspecting victims discovering too late that a harmful hook was hidden inside attractive bait.
Proposition 19 had an attractive title: the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. What voter wouldn’t want to protect the homes of seniors, disaster victims and the disabled?
The proponents who bankrolled the campaign promoted its laudable components and kept its sharp hook hidden.
On the laudable side, Proposition 19 allows homeowners who are over 55, disabled or displaced by a natural disaster to transfer the enrolled (i.e., taxable) value of their primary residence to a newly purchased or newly constructed replacement primary residence in any of California’s 58 counties.
For example, I am 65 and live in Solano County. I bought my house in 1992. Its enrolled value for purposes of calculating my property tax is roughly $300,000, thanks to Proposition 13, even though it would sell for more on the open market. Normally, when property changes ownership, the purchase price becomes the new enrolled value for property tax purposes. But under Proposition 19, I could move to Lake County and transfer the $300,000 enrolled value from my old house to a comparable new house that I buy for $500,000. In other words, my property taxes would stay the same.
This feature of Proposition 19 is called the Portability Provision. Portability is a policy that HJTA has supported for a long time because it benefits homeowners who are retired or disabled and want to move closer to children or caregivers who can provide needed assistance. It also benefits fire victims who do not want to rebuild in fire-prone areas. The Portability Provision is what the proponents touted in the Yes on 19 campaign.
Hidden in the fine print of Proposition 19, however, was a hook. Proposition 19 mostly repealed the right of seniors to transfer their enrolled values to their children or grandchildren.
Prior to Proposition 19, parents could transfer their primary residence and up to $1 million of additional property to their children, before or after death, and the children would inherit their parents’ enrolled value. If the parents were deceased, then grandparents could do the same thing. This right enabled families to keep legacy properties in the family, such as a homestead or family business.
Now, under Proposition 19, children can only keep the enrolled value of their parents’ primary residence, and only if it is their primary residence after the transfer. Most property transfers from one generation to the next occur upon death, and the children by then are usually adults living in their own homes with no intention, or no ability, to move into Mom and Dad’s old house. As a result of Proposition 19, then, most Californians grieving the loss of a parent will also be hit with a significant tax increase that may force them to sell their inherited home or business.
We at Howard Jarvis Taxpayers Association have been inundated with calls and e-mails from distressed seniors who, in their will or trust, planned to pass property to their children as a source of income, but are now realizing that their children will not be able to afford the Prop. 19 tax increase.
To fix this problem, HJTA sponsored two bills in the Legislature — SB 668 and ACA 9. ACA 9 is a proposed constitutional amendment that would restore the right that parents and grandparents had before Proposition 19 to transfer their enrolled values to the next generation. SB 668 would suspend the effect of Proposition 19, as a stopgap measure, until the voters had a chance to vote on ACA 9.
In seeking allies to help us lobby for the passage of these bills, we contacted AARP, the American Association of Retired Persons. If ever there was a natural ally, we thought, it would be AARP since its membership includes millions of California seniors who would not want their children to face a death tax.
AARP supports or opposes many bills that move through the California Legislature that have no special connection to the retirees AARP supposedly represents. These include bills regarding climate change, mapping congressional districts, and electric vehicle subsidies.
Yet when we asked AARP to take a position that supported our bills, it declined. AARP believes that the government’s need for more tax revenue outweighs the desire of its members to pass their property down to their children without the children incurring a tax hike that forces them to sell the property.
If you are an AARP member, and you think AARP made the wrong call, we urge you to let them know. As for me, I plan to cancel my AARP membership.