County Assessor Alexander H. Pope's proposal to correct inequities in property taxes resulting from Proposition 13, the trend-setting 1978 legislation that reduced property taxes by at least 50%, is gathering momentum.
Assemblyman Dave Elder (D-Long Beach) is currently having the necessary legislation drafted to carry out Pope's plan to increase homeowner exemptions based on an index relating to inflation. The tax reduction bill is expected to be introduced in about two weeks.
Since 1974, state law has mandated a $7,000 homeowner exemption for tax purposes but the average price of a home then was $30,000 and that exemption represented a substantial percentage reduction in homeowner assessments.
With today's average house price of $130,000, the same $7,000 exemption barely makes a dent in the taxes owed, Pope said in explaining his tax relief plan.
"Our state Legislature has the power to raise the amount of the homeowners' exemption. If the exemption were simply indexed for new home buyers to the increase in home values since 1975 (the Proposition 13 rollback year), the post-1975 homeowners would obtain at least a modest measure of relief from inflation."
Such a major revision would preserve the full protection of Proposition 13 for pre-1975 buyers, while providing needed and fair relief to newer buyers and offer encouragement to would-be buyers.
Additionally, as required by the state Constitution, equivalent relief would be granted to renters by adjustments in renters' credit. Unlike 1978, renters would not be left out of benefits as they were then when only relatively few property owners "passed along" rent reductions to their tenants.
In Pope's proposal, the index (see chart) would include the year of purchase, housing inflation percentage and the exemption figure. It would maintain the present $7,000 homeowner exemption for all homes purchased in and prior to 1975. Then it would increase the exemption to $8,400 for a dwelling bought in 1976 and to $24,250 for a house bought in 1985.
For this year and next, the exemptions are estimated at $25,000 and $26,000, respectively. The benefits and differences would obviously be welcomed by more than 52% of Los Angeles County's taxpayers who now pay three-quarters of all the residential property taxes assessed in this county.
"They purchased at later (after passage of Proposition 13), more inflationary values and are generally paying three, four and even five times as much property tax as their neighbors who own similar homes," Pope said. "Many are paying more property taxes than the owners of those same homes before the passage of Proposition 13."
But where any tax cut occurs, there is a drop in revenue, from both owners and renters in this case, of about $500 million, according to Pope's reckoning.
Even before last Tuesday's surprise hinting by Gov. George Deukmejian that taxpayers may be in for a tax rebate because of California's healthy fiscal position, Pope cited possible avenues to offset such revenue losses from the creation of a homeowner exemption index.
"The governor has proposed, and the Legislature is considering, an equally costly tax break for multi-national corporations--repeal of the unitary method of computing corporate income tax. The Legislature and the governor will, of course, have to make the final decision between the multi-nationals, many of whom seem to be doing very nicely in our California markets, and our hard-pressed new homeowners. My vote goes to the homeowners."
Additionally, Pope pointed to a healthy state reserve fund of $1.6 billion and suggested corporate tax "loophole-closing" as other possible areas to compensate for revenue losses if his tax reduction plan is adopted.
The discussion in this space Dec. 15 of Pope's concern for correcting our property tax structure hit some very tender nerves of scores of taxpayers who have been contributing letters to "Our Readers Write" column, expressing their specific concerns, and we have published a goodly cross section of those views.
PROPOSAL FOR HOMEOWNERS TAX RELIEF
PURCHASE YEAR HOUSING INFLATION EXEMPTION 1975 AND BEFORE $7,000 1976 19.7% $8,400 1977 30.1% $10,900 1978 24.9% $13,600 1979 21.9% $16,600 1980 22.1% $20,300 1981 9.9% $22,300 1982 2.1% $22,750 1983 .7% $22,900 1984 4.3% $23,900 1985 1.5% $24,250 1986 (estimate) 3.0% $25,000 1987 (estimate) 4.0% $26,000