Gann Unveils Campaign to Fix Glitch in Prop. 13

Paul Gann, who co-authored the landmark Proposition 13, joined other anti-tax crusaders Wednesday in unveiling legislation “that would provide fairness” to California homeowners who bought after the 1978 property-tax slashing ballot measure was passed.

The bill, which requires approval by the Legislature and by the voters, would amend Proposition 13 to roll back taxes on all homes purchased since Proposition 13 took effect. It is estimated that more than half the state’s homeowners would qualify for rollbacks.

The aim of the bill--which also was endorsed by the head of the tax-cut movement founded by the late Howard Jarvis--is to remedy a common situation in which neighbors face widely divergent tax bills on nearly identical property.

Gann, who last week announced that he is dying of AIDS, strongly suggested that he or his successors would lead another initiative drive if the Legislature fails to place the measure on the 1988 ballot.

“I hope it passes so we don’t have to go out and become legislators again ourselves,” he said.

Telling the story of a neighbor who lives in a similar house yet pays 60% more in taxes, Gann said: “It’s embarrassing when he asks me every morning, ‘Hey, when are you going to do something for us poor folk?’ My point is this, it is unfair.”

Proposition 13, overwhelmingly approved by voters in the midst of spiraling home prices and dramatic increases in tax assessments, rolled back property taxes for all existing homes to 1975-76 levels and limited future increases to no more than 2% per year.

However, the measure allowed homes purchased or built after July 1, 1978, to be reassessed each time they were sold, at 1% of their market value. As prices continued to rise and more properties changed hands, an increasing number of homeowners faced higher property tax bills.

Today, officials estimate that 55% of homes either changed hands or were built after the ballot initiative took effect.

The bill, which was introduced on Wednesday, would return the tax assessments of those properties to their 1975-76 levels, then allow a 2% upward adjustment for each subsequent year. For newly built homes, counties would estimate what their value would have been in 1975-76 if they had existed at that time.

While the measure would reduce taxes on homes bought since July 1, 1978, it would have no effect on homes purchased before that date.

In a major departure from the original ballot measure, the bill would offer the tax breaks only to owner-occupied, single-family homes. Commercial property, apartments and vacation homes, all of which benefited equally under Proposition 13, would continue to be reassessed at 1% of value each time they are sold or transferred to a new owner.

The bill requires the state to reimburse local governments for tax losses they would suffer. But supporters said the $2 billion the measure would cost the state each year could be offset by an even larger budget surplus than currently is projected if the economy continues to grow at its present rate.

To illustrate the disparity created by Proposition 13 over time, backers of the bill distributed a chart showing the taxes paid on identical median-priced homes over the last decade. The tax bill on one home purchased in 1975 for $41,000 is approximately $509 a year. An identical home purchased in 1986 is taxed about $1,315 yearly.

Under the bill to revise Proposition 13, the owner of the newly purchased home would see his tax bill fall to about $509, an $805 reduction.

“Simple justice dictates that we make what amounts to a mid-course correction in Proposition 13,” said Assemblyman Ross Johnson (R-La Habra), the bill’s author. Johnson, one of several “Proposition 13 babies” who were swept into office in the wake of the tax-cut movement, said “it’s simply not right” to force new homeowners to bear a disproportionate tax burden.

Ironically, the example of two neighbors with vastly different tax bills was used during the 1978 campaign by opponents as an example of the striking inequities that would be created by the ballot initiative. In the years since passage of Proposition 13, many officials predicted that as properties changed hands, there would be a popular uprising against the measure.

Joel Fox, president of California Tax Reduction Movement founded by Jarvis, defended the initiative, saying, “Even the grandest document in our political history--the U.S. constitution--required updating.”