One would think that last year’s passage of Proposition 30, which gave California the highest income tax and sales tax rates in America, would satiate politicians’ appetite for even higher taxes — if even for a moment. No such luck. Not only are legislators vigorously promoting changes to Proposition 13 that would make it much easier to raise property taxes by doing away with the two-thirds vote, there is almost no limit to the other current schemes designed to squeeze more revenue from the public.
Indeed, the California Taxpayers Association has identified 66 bills representing more than $11 billion in new revenue now moving in the Legislature.
One such bill, flying under the radar scene until recently, is a direct hit on property owners. Senate Bill 391 by Bay Area Sen. Mark DeSaulnier places a $75 recording tax on documents filed in county recorder offices for items ranging from construction and business loans, liens and documents associated with refinancing. And the costs escalate rapidly because the tax is based on each filing. For example, refinancing a home can easily require up to six different documents to be recorded with the county. This would result in a $450 tax hike per transaction.
The greed of the majority of lawmakers for taxpayer dollars is such that their focus is almost exclusively on how much revenue a tax will raise, not on what the impact will be on those being taxed. All they are able to see is the $500 million to $700 million the tax is estimated to bring in annually, not that the bill punishes those it is said to help. One of the stated purposes of SB 391 is foreclosure mitigation, but the bill places the $75 tax on both the recording and removal of a notice of default and a trustee’s sale. While home values have started to rebound, this is a punitive step to take against individuals still struggling with upside-down mortgages.
As troubling as this tax hike may be, even more alarming is the unscrupulous way in which the legislative leadership is attempting to secure its passage.
Earlier this year, SB 391 was “joined” to another piece of legislation, Senate Bill 30, a common-sense bill that eliminates income tax liability on mortgage debt that is forgiven when a homeowner engages in a bank-approved short sale. For a taxpayer who cannot afford to keep their home to still be liable for income tax on debt that is forgiven by a lender is patently unjust. Recognizing this, Congress has already approved the elimination of this income tax liability for federal tax returns.
Although the State Senate unanimously passed SB 30 to conform state law to the new federal standard, Democratic leadership insisted SB 30 be joined to the SB 391 tax hike. Now, the favorable SB 30 cannot pass the State Assembly unless members also approve the draconian tax hikes in SB 391.
There is nothing that could justify this deal. The income tax suspension on forgiven mortgage debt in SB 30 is only for the remainder of the year and ends Jan. 1, 2014. But the massive tax in SB 391 goes on forever.
Holding hostage reasonable and appropriate relief for struggling homeowners is one of the clearest examples of the arrogance of the current legislative supermajority. They just can’t seem to do the right thing without insisting on a major payoff in return.
Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed
“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”