BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Gilbert Cedillo, Chair
SB 764 - Morrow
Amended: As introduced
Hearing: April 30, 2003 Tax Levy Fiscal: YES
SUBJECT: Property tax: Increases disabled veterans'
exemption from $100,000 to $200,000
EXISTING LAW (Constitution) allows the Legislature to
exempt in whole or in part from property taxation the home
of a person, or the person's spouse (including an unmarried
surviving spouse) if the person, as a result of injury
incurred in military service, is blind in both eyes, has
lost use of two or more limbs, or is totally disabled, or
if the person has, as a result of service-connected injury
or disease, died while on active duty.
The Legislature has implemented this constitutional
provision by granting the disabled veterans' exemption to
such individuals or their surviving spouses. Currently the
exemption is in an amount not to exceed $100,000. In the
case of eligible veterans with household income of $40,000
or below, the exemption is $150,000.
THIS BILL would double the disabled veterans
exemption, to $200,000. And for veterans with income of
$40,000 or below, the bill would increase the exemption to
$250,000. The bill also indexes the exemption amounts for
changes in the Consumer Price Index.
FISCAL EFFECT:
BOE estimates a property tax revenue loss of $4.4
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million for 2004, rising to as much as $5.6 million in 2008
due to the inflation indexing provision.
This revenue loss would impact the state and local
governments equally. The state does not reimburse local
property tax losses due to the disabled veteran's exemption
(as it does for the homeowner exemption). But about of
the loss would be to schools, and the state back-fills
school property tax losses through the school finance
formula. Thus the state General Fund loss would be in the
$2 million range.
COMMENTS:
A. Purpose of the bill
The author's office indicates that the veterans'
property tax exemption is a very beneficial program to
those disabled veterans and their surviving spouses who are
living on fixed incomes, usually derived from their
disability payments. With the high cost of property values
in California, the current exemption amount of $100,000
offers only partial relief to those disabled veterans and
spouses eligible for the exemption. The increase proposed
by this bill is necessary to provide for a benefit that
will keep pace with rising property tax assessments.
Sponsors indicate that the exemption has not been increased
since 1989, and housing prices have clearly increased a
great deal since that time.
The author indicates that when originally enacted,
this exemption was intended to give meaningful tax relief
to veterans who had been permanently injured while serving
our nation in the armed forces. However, the full value of
this exemption has diminished over time due to soaring
property values in California. The California Association
of Realtors recently reported that California's median home
price is now $327,600. In 1989, the state's median home
price was $196,120. Thus, home prices have increased more
than $100,000 since the last time the disabled veterans'
property tax exemption was increased in 1989. This means
that young, recently disabled veterans returning home from
Iraq cannot receive the level of meaningful property tax
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relief intended by the Legislature when it originally
enacted the property tax exemption.
B. $200,000 is a very sizable property tax exemption
The property tax reduction represented by a $200,000
property tax exemption is over $2,000. California's
property tax has been kept well under control by virtue of
Proposition 13's tax rate limit and cap on assessment
increases. At this time of budgetary sacrifice, is it a
good time to be doubling an already quite generous
exemption, even for disabled veterans?
C. Index factor (CPI) exceeds 2% Proposition 13
assessment increase factor
The bill provides for indexing the disabled veterans'
exemption for changes in Consumer Price Index. But
Proposition 13 guarantees that unless there is new
construction or a change in ownership the maximum assessed
value will not increase by more than 2% annually. In most
years the CPI increase has exceed 2% -- so the exemption
would grow by more than the increase in property tax.
Support and Opposition
Support:Cal-San Diego Paralyzed Veterans Association
(sponsor)
California State Commanders Veterans Council
California Association of County Veterans
Service Officers, Inc.
Bay Area & Western Chapter of the Paralyzed
Veterans of America
Disabled American Veterans - Department of
California
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Consultant: Martin Helmke
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