Venezia: Proposition would impact many Newport homeowners

With the 2016 elections around the corner, all kinds of state initiative supporters are busy gathering the 585,880 valid registered voter signatures required to qualify for the ballot by March 21.

One initiative I read about coming out of Sacramento this week was the “Lifting Children and Families Out of Poverty Act.” It plans on fighting poverty by making those who own property assessed at $3 million or more pay more.

This could impact our area and the county quite negatively.

The initiative filing by proponents Jim Mangia, Martine Singer, Conway Collis and Dixon Slingerland, states:

It “will not raise sales or income taxes. It will avoid any additional tax burdens on middle and lower income Californians. Those most at risk should not and cannot bear these costs. Instead, a sensible and fair surcharge on properties with values of over $3,000,000 will be assessed to pay for this bold anti-poverty initiative, while keeping all Proposition 13 property tax protections against reassessments and limitations in place.”

You can read up on the initiative at oag.ca.gov/system/files/initiatives/pdfs/15-0043%20(Prenatal%20and%20Early%20Childhood%20Services)_0.pdf

It’s important to note the measure doesn’t differentiate between residential or commercial properties.

A recent California Tax Payers Assn. newsletter, CalTax, reviewed this initiative explaining, “The “surcharge,” commencing with the 2017-18 fiscal year, would be an additional 0.3 percent tax on the portion of assessed value between $3 million and $5 million; 0.6 percent on the value between $5 million and $10 million; and 0.8 percent on the value in excess of $10 million. The initiative includes a sunset provision that would make the entire measure inoperative on January 1, 2040.”

CalTax also had some background on a few proposing this measure.

They say Collis, a Democrat who served on the Board of Equalization for eight years in the ‘80s, was also was a domestic policy adviser to late-U.S. Sen. Alan Cranston. He now serves as president of GRACE (Gather, Respect, Advocate, Change and Engage), a nonprofit in Pasadena.

Slingerland is an executive director of the Youth Policy Institute, and a major fundraiser supporter of President Obama, according to media reports.

“The measure would put members of such agencies on panels that would be in charge of spending some of the money from the property-tax increase,” states CalTax.

Supporters say passage of the initiative could bring increased state revenues between $6 billion and $7 billion for the 2017-18 fiscal year.

I asked newly elected state Sen. John Moorlach (R-Costa Mesa) for his thoughts on this proposed measure.

It wasn’t on his radar, but it is now.

“I’m opposed to ballot-box budgeting,” he said. “The general fund, with its various taxing sources, should address the poor. Creating a myriad of special taxes is not the most efficient way to run a government.”

And he says assessed values are tricky business.

Pre-Proposition 13 babies may have low assessed values, but have high market values. Therefore, they would avoid the surcharge for not having moved over the last 37 years, he explained.

“New homeowners may or may not be amused with the tax,” said Moorlach.

Ever the accountant, Moorlach figures 1% of $3 million is $30,000 a year in property taxes, and it will rise 2% per year. Therefore, in 36 years, it will double to $60,000 per year (or $5,000 per month).

And he foresees this negatively impacting high-end home sales, thus reducing potential capital gains tax revenues for the state.

“I believe the state should enjoy the benefits of property appreciation at the point of a taxable sale, so I’d be opposed to the measure from this perspective as well,” he says. “There should be an elimination of all of these special taxes and a more fair overall combined taxing structure.”

I asked Roseanne Levan, a Realtor with Teles Properties in Newport Beach, which specializes in high-end residential real estate, what percentage of homes sold this past year in O.C. were in the $3 million range.

About 10%, she said.

And her opinion on the referendum?

“Why would the state of California be taxed on the same type of tax Obama is taxing on the sale of properties at 3.8%?” she said. “So California homeowners will be taxed on real estate on a state and federal level. That’s insane.”

Lucy Dunn, president and CEO of the Orange County Business Council, also had some strong feelings about this measure, and said her organization is strongly opposed to ballot initiatives that undermine Prop. 13 tax protections.

“This is one of several proposed 2016 ballot measures to increase taxes by special interests for special interests,” she said. “It will increase costs of living for all in a high-cost county and state. Instead, better fiscal management of California’s ever-increasing $168-billion budget, modernizing government services for a 21st century economy, and growing middle-class jobs are needed to lift families out of poverty.”

BARBARA VENEZIA lives in Newport Beach. She can be reached at bvontv1@gmail.com. Listen to her weekly radio segment on “Sunday Brunch with Tom and Lynn” from 11 a.m. to noon on KOCI/101.5 FM.