I owe you an apology. As often as my editorials discuss systematic flaws or failed plans of others, it is only right that I admit when I failed to protect our members.
During the 2020 election cycle, Sonoma County Farm Bureau was more politically engaged than ever. We were a founding member of the 2020 Sonoma County Tax Moratorium Coalition and actively participated in the No on Prop 15 campaign. Unfortunately, there was another Proposition on the ballot that should have shared our close attention—Proposition 19. Prop 19, which narrowly passed with only 51% of the voters’ support, was touted as a property tax measure to help seniors and wildfire victims. However, just as detrimental to farm families as the failed Proposition 15, Prop 19 guts many of the benefits provided to our members through long-standing, constitutional exemptions, and considerations around property taxes.
In several previous Farm News editorials, I have discussed the need for more responsible government, and Proposition 19 is a demonstration of how our state legislative branch needs an overhaul. There seems to be a race by elected officials to author bills and to create their legacy in the short time they are in office because of term limits. Further, special interest groups – in this case, California’s realtors – craft measures and policies that read like fairytales but are developed to line their pockets. After all, realtors need inventory and the more often properties and houses change owners, the more opportunity for the next sale. It is my understanding that other states require an unbiased, independent analysis completed by non-government professionals when a measure hits the ballot. It makes sense to me. Having government, who typically benefits from additional taxes, determine the financial impact of potential legislation seems a bit like the coyote guarding the flock.
Proposition 19, which went into effect on February 16, will have severe financial consequences for children inheriting property from their parents. It created a landmark change to Prop 13, the 1978 law that aims to limit property taxes. It eliminates the “parent-child” and “grandparent-grandchild” exclusions for inheritance of property and the associated property tax assessment.
In addition, prior to Prop 19’s passage, parents could transfer a primary residence to children without any new fair-market reassessment, regardless of how the children chose to use the real property. Now, for principal residences, children or grandchildren will be burdened with a new formula for assessment. This will be especially costly for multi-generational farm families whose tax rates have for decades been tied to limited annual increases based on the original purchase price of the property.
Seemingly, the negative impacts of this legislation came out of nowhere— with California Farm Bureau Federation remaining neutral on Prop 19 in its 2020 Voter Guide. We also did not see other statewide organizations like the business community, which usually align with us, put effort into opposing the proposition. On the California Secretary of State’s website, it indicates that the supporters of Prop 19 contributed almost $38 million to get it across the finish line, and only $48,000 were contributed to defeat it. That alone is an indicator of what bad legislation Prop 19 is considering the realtors had to spend 800 times more dollars to barely succeed in their effort.
I fear Prop 19 will hurt dairy, livestock, and poultry operations the hardest. These family farms have been around for several generations, and in some cases, hundreds of years. Without a slow ramp-up to significant increases in property taxes owed, the younger generation of farmers will find it difficult to pay the escalated taxes. I get chills thinking about how this may play out for siblings trying to settle property after the loss of their parents, especially when one family member is interested in remaining in farming and the other family members want to move on with their fair share of the estate.
We are all keenly aware of the many barriers to entry into the agricultural industry—rising land prices, mounting regulations, and increasing costs to do business—now we, unfortunately, are adding an additional barrier for the next generation of farmers and ranchers and to those who simply want to keep their family home or property. Especially after the challenging year we have all had, how many people can handle a two- or three-digit percentage increase in their property tax bill right now?
I recently participated in a session on Prop 19 where even the Board of Equalization (BOE) staff seemed confused and baffled by the legislation. During that meeting, one BOE representative indicated that it will be several months before they come out with any kind of clarifying information. If the state department that manages property assessments and property taxes cannot interpret this new legislation, why is it already going into effect?
Currently, the California Farm Bureau is challenging interpretations of the new legislation as it poses significant challenges for farmers and ranchers. There have been rumblings of lawsuits and the local state legislators are getting bombarded with phone calls from families who feel that have been boondoggled. In conversations with people who know much more than I do about legislation, it will most likely take a proposition or vote of the people to reestablish the exemption for parental transfers.
Feeling defeated? Wondering what you can do? Keep logging those calls to our state representatives. In the meantime, I will try and right the wrong by encouraging our state organization to use their talent and clout to find some relief from this onerous legislation.