2020 California Proposition 19

Proposition 19, also referred to as Assembly Constitutional Amendment No. 11, is a complex California ballot proposition that appeared on the ballot for the general election on November 3, 2020.[1] Proposition 19 passed with just over 51% of the vote.[2] As passed, the proposition increases the property tax burden on owners of inherited property in favor of providing expanded property tax benefits to homeowners ages 55 years and older, disabled homeowners, and victims of wildfires and natural disasters.[3] According to the California Legislative Analyst, Proposition 19 is a large net tax increase "of hundreds of millions of dollars per year."[4]

Proposition 19

November 3, 2020
Assembly Constitutional Amendment No. 11
Results
Response Votes % Yes 8,545,393 51.11% No 8,175,618 48.89%
Results by county

According to the ballot summary, Proposition 19:[5]

• Allows homeowners who are over 55 years of age (without regard to wealth), disabled, or victims of natural disasters to transfer their existing property tax assessed value under 1978 California Proposition 13 to a replacement home, including a more expensive home.
• Significantly limits the existing property tax benefits under Proposition 13 for certain real estate transfers between family members, such as the transfer of property from a parent to a child following the death of the parent.
• Expands property tax benefits for family farm transfers.
• Allocates net state (but not local) revenues and savings (if any) to wildfire response and for reimbursing local governments. However, because the COVID-19 pandemic has created significant uncertainty for the state budget, the Legislative Analyst believes that the vast majority of the wildfire funding will not be available until 2025 at the earliest.[6]

The proposition becomes effective on February 16, 2021.[7]

Background

The California Association of Realtors previously sponsored and financed an initiative measure known as 2018 California Proposition 5 on the November 2018 ballot that would have further expanded Proposition 13 property tax breaks for certain homeowners (primarily homeowners over age 55) by allowing them to transfer their lower property tax base to replacement property.[8] That ballot measure failed statewide with 40% support, and also failed to receive majority support in all 58 California counties.[9] Proposition 5 opponents successfully argued that the initiative measure was a "huge tax break to wealthy Californians" and a "huge windfall to the real estate industry."[10]

In 2019, the California Association of Realtors sponsored and financed another initiative measure that would have expanded Proposition 13 property tax breaks for certain homeowners like the 2018 California Proposition 5 ballot measure. However, to generate a net increase in property tax revenue, the initiative also significantly narrowed Proposition 13 property tax reassessment exclusion rules for inherited properties and expanded the scope of business entity ownership changes that would result in commercial property reassessment under Proposition 13.[11] This initiative measure received sufficient signatures to qualify for the November 2020 ballot.[12]

Thereafter, as allowed under California law,[13] the California Association of Realtors negotiated with various special interests to secure legislative approval of an alternative constitutional amendment known as Assembly Constitutional Amendment No. 11 (ACA 11).[14] Proposition 19 was added to the ballot via ACA 11 which was authored by San Mateo Assemblymember Kevin Mullin.[15]

Significant controversy arose because the legislative approval of ACA 11 missed the regular legal deadline for placing measures on the November 2020 ballot, and the Legislature also had to enact a separate statute calling a special election for ACA 11 that was consolidated with the regular November 2020 election.[16] In response to the approval and qualification of ACA 11 for the November 2020 ballot, the California Association of Realtors withdrew its 2019 initiative measure that was previously eligible to appear on the November 2020 ballot.[17]

The primary differences between Proposition 19 and the 2019 initiative measure withdrawn by the California Association of Realtors are that Proposition 19 excluded the expanded business entity ownership provisions that would have resulted in commercial property reassessment under Proposition 13 (to appease major business interests who did not like the business tax increase component of the 2019 initiative) and that Proposition 19 added the partial firefighting revenue provisions as a political sweetener (to appease firefighting organizations that previously opposed 2018 California Proposition 5[18]).[19]

Thus, compared to the 2019 initiative measure, Proposition 19 retained the expanded Proposition 13 property tax breaks for certain homeowners (primarily homeowners over age 55) like those contained in the defeated 2018 California Proposition 5 ballot measure, retained the property tax increase provisions by significantly narrowing Proposition 13 property tax reassessment exclusion rules for inherited properties, and added the partial firefighting revenue provisions as a political sweetener.[20]

Real estate industry sponsor and prior history

The California Association of Realtors sponsored the Proposition 19 constitutional amendment,[21] with the expectation of deriving significant profits from many more home sales under the ballot measure, including from both the expanded tax benefit portability provisions and from the significant narrowing of the inheritance exclusion provisions which will force more home sales.[22] The president of the California Association of Realtors has denied that Proposition 19 is about making money for the Realtors.[23]

Racial equity issues

In analyzing the Proposition 19 ballot measure, a September 2020 report by the California Budget & Policy Center stated that: "Housing policy and tax policy have historically benefited white households most, including through policies with explicitly racist design and implementation that have blocked Black and brown Californians from homeownership opportunities. By directing additional tax benefits largely to white homeowners, Prop. 19 reinforces racial inequity within California's tax system."[24]

The Greenlining Institute has also criticized Proposition 19 for not helping "first-time homeowners who are disproportionately Black, Indigenous and people of color."[25]

Unfortunately, The Greenlining Institute and the California Budget & Policy Center critiques are either against their own interests or misleading by ignoring significant externality effects. Proposition 19 further hinders and disincentivizes home ownership by people of color due to the removal of tax exemptions by increasing taxes upon property tax transfers. The increased taxes would disproportionately hurt people of color due t the excessively increased tax burdens. This makes homeownership by future families of color less possible and could even lead to increased gentrification as families of color sell properties due to the increased tax burdens that they cannot nor are willing to pay.

According to data from the Los Angeles County Assessor, the significant curtailment of the property tax inheritance exclusion under Proposition 19 would adversely impact many property owners in minority communities.[26] For example, significantly more property owners have claimed the property tax inheritance exclusion in the city of Compton than in the cities of Beverly Hills and Malibu combined.[27]

Campaign controversy

It was reported[28] that the California Association of Realtors, the sponsor of Proposition 19, hired a former employee of a statewide taxpayer association for the sole purpose of using the former employer's job title to confuse voters to support Proposition 19. A radio ad was cited in the article as being deceptive because the former employee lead listeners to believe he was advocating for the Proposition 19 tax increase in his capacity as the former legislative director of the statewide taxpayers association. The statewide taxpayers association received many calls from voters who said they were disgusted by the misleading radio ads and large direct mail pieces by the Yes on 19 campaign. The reporting article also cited a California Globe analysis that Proposition 19 is a billion dollar tax increase on California families and that Proposition 19 was in fact opposed by the statewide taxpayers association.[29]

Newspaper editorials

According to the California Initiative Editorial Scorecard, Proposition 19 was opposed by 16 major California newspapers and supported by 7 major California newspapers.[30]

The following major California newspapers opposed Proposition 19:[31]

Newspaper	Position
Los Angeles Times	Oppose
San Jose Mercury News	Oppose
Orange County Register	Oppose
East Bay Times	Oppose
San Francisco Chronicle	Oppose
The Press-Enterprise	Oppose
San Gabriel Valley Tribune	Oppose
The Daily Breeze	Oppose
Los Angeles Daily News	Oppose
The Santa Rosa Press Democrat	Oppose
Long Beach Press-Telegram	Oppose
Inland Valley Daily Bulletin	Oppose
San Bernardino Sun	Oppose
The Desert Sun	Oppose
Chico Enterprise-Record	Oppose
Bakersfield Californian	Oppose

The following major California newspaper supports Proposition 19:[32]

Newspaper	Position
San Diego Union-Tribune	Support
Sacramento Bee	Support
Palo Alto Daily Post	Support
San Luis Obispo Tribune	Support
Fresno Bee	Support
Santa Cruz Sentinel	Support
Modesto Bee	Support

Campaign contributions

According to campaign contribution data from the California Secretary of State, as of November 1, 2020, supporters of Proposition 19 have raised $47.0 million, with $40.4 million from the California Association of Realtors and $4.9 million from the National Association of Realtors, for a combined total of $45.3 million (96.4% of all campaign contributions) coming from real estate interests. Opponents of Proposition 19 have raised approximately $45,000.[33]

Polling

In order to pass, Proposition 19 needs simple majority (>50%) approval by the voters.

Poll source	Date(s) administered	Sample size[lower-alpha 1]	Margin of error	For Proposition 19	Against Proposition 19	Undecided
SurveyUSA	September 26–28, 2020	588 (LV)	± 5.4%	56%	10%	34%

Notes

1. Key:
   A – all adults
   RV – registered voters
   LV – likely voters
   V – unclear

References

1. Alpert, Adrienne (September 29, 2020). "What is Prop.19? Measure would change several facets of property tax rules in California". ABC 7. Retrieved September 29, 2020.
2. "California voters approve Prop. 19, giving new property tax breaks to older homeowners". Los Angeles Times. 11 November 2020. Retrieved 24 November 2020.
3. "California Proposition 19, Property Tax Transfers, Exemptions, and Revenue for Wildfire Agencies and Counties Amendment (2020)". Ballotpedia. Retrieved September 24, 2020.
4. Grimes, Katy (October 26, 2020). "Former CAGOP Chairman, Taxpayers Assoc. Employee Mislead Voters on Prop. 19". California Globe.
5. "Proposition 19 Official Title and Summary | Official Voter Information Guide | California Secretary of State". voterguide.sos.ca.gov. Retrieved 2020-10-05.
6. Dillon, Liam (October 19, 2020). "Who wins and who loses with California property tax measure Proposition 19". Los Angeles Times.
7. https://www.boe.ca.gov/prop19/
8. Changes Requirements for Certain Property Owners to Transfer Their Property Tax Base to Replacement Property. Initiative Constitutional Amendment and Statute. California Initiative AG No. 17-0013 Am. 1 (2017).
9. California Secretary of State, Statement of Vote November 6, 2018 General Election, pp. 95–97.
10. Ballot Pamphlet, California General Election (November 6, 2018), argument against Proposition 5, p. 39.
11. Changes Requirements For Transferring Property Tax Base To Replacement Property. Expands Business Property Reassessment. Initiative Constitutional Amendment. California Initiative AG No. 19-0003 (2019).
12. California Secretary of State AP 20:040, New Measure Eligible for California's November 2020 Ballot, April 23, 2020.
13. Cal. Elec. Code, § 9604.
14. Assem. Const. Amend. No. 11, Stats. 2020, res. ch. 31.
15. Campbell, Kelsey (August 5, 2020). "November 2020 Ballot Initiatives in California Aim to Change Policy on Commercial and Residential Properties". Briscoe Ivester & Bazel LLP.
16. Cal. Stats. 2020, Ch. 26, effective June 30, 2020.
17. California Secretary of State, Chief Counsel Letter Re Conditional Acceptance of Conditional Withdrawal of Initiative AG No. 19-0003, June 25, 2020.
18. Ballot Pamphlet, California General Election (November 6, 2018), argument against Proposition 5, p. 39.
19. Walters, Dan (September 30, 2020). "Proposition 19's tortuous journey to the ballot". Orange County Register.
20. Assem. Const. Amend. No. 11, Stats. 2020, res. ch. 31.
21. Assem. Floor Analysis of Assem. Const. Amend. No. 11, Concurrence in Sen. Amendments, June 25, 2020, p. 4.
22. "Editorial: Prop. 19 perpetuates California property tax inequity". The Mercury News. August 1, 2020.
23. Dillon, Liam (October 19, 2020). "Who wins and who loses with California property tax measure Proposition 19". Los Angeles Times.
24. Kimberlin, Sara; Kitson, Kayla (September 2020). "Proposition 19: Creates a Complicated Property Tax Scheme and Reinforces Racial Inequities in California". California Budget & Policy Center. Retrieved 7 October 2020.
25. The Greenlining Institute, 2020 California Ballot Propositions Guide (Proposition 19) (September 16, 2020).
26. Los Angeles County Assessor, Propositions 58 and 193 exclusion dataset (2017).
27. Los Angeles County Assessor, Propositions 58 and 193 exclusion dataset (2017) [breakdown by cities].
28. Grimes, Katy (October 26, 2020). "Former CAGOP Chairman, Taxpayers Assoc. Employee Mislead Voters on Prop. 19". California Globe.
29. Grimes, Katy (October 26, 2020). "Former CAGOP Chairman, Taxpayers Assoc. Employee Mislead Voters on Prop. 19". California Globe.
30. Rodota, Joe; Klink, Matt (October 14, 2020). "California Initiative Editorial Scorecard #3". Fox&Hounds. Retrieved 14 October 2020.
31. Rodota, Joe; Klink, Matt (October 14, 2020). "California Initiative Editorial Scorecard #3". Fox&Hounds. Retrieved 14 October 2020.
32. Rodota, Joe; Klink, Matt (October 14, 2020). "California Initiative Editorial Scorecard #3". Fox&Hounds. Retrieved 14 October 2020.
33. "Campaign Finance Power Search, Ballot Measures Advanced Search (November 3, 2020 Ballot Measures, Proposition 19)". California Secretary of State. November 1, 2020.