Some Tinkering With State Tax System Expected

While the U.S. Supreme Court decision upholding Proposition 13 was widely applauded in California, some groups said they plan to seek remedies for what they regard as the unfairness of the landmark initiative.

The California Tax Reform Assn. is considering an initiative for the 1994 ballot that would keep Proposition 13’s limits on homeowners’ taxes but require annual, upward reassessment of commercial property.

“The homeowners’ protections are good into the 21st Century,” said Lenny Goldberg, the group’s executive director. “But non-residential property should be assessed at market value, period. It’s a one-line change (to Proposition 13). It won’t be on the ballot this year but one way or another, it’s coming.”

Such a constitutional amendment would mean $4 billion to $6 billion a year more revenue for schools and local governments, Goldberg said.

In Orange County, officials applauded the court’s decision, with some warning the state not to try to undo Proposition 13.

“Cities heard the message (of voters) 14 or 15 years ago,” said Bill Hodge, executive director of the Orange County League of Cities. “They have been cutting back staffs and budgets and lived within their means ever since.”

Anaheim Mayor Fred Hunter also cautioned the state Legislature not to “tinker” with the property tax issue. “That’s just the way it is--that’s life,” Hunter said.

Sounding a sigh of relief shared by senior citizens, Santa Ana City Councilwoman Patricia A. McGuigan said the court ruling was a “blessing.”

“I have lived in the same house for 28 years,” she said. “Thank goodness for Proposition 13. I am very relieved.”

When Orange resident Al Palladino first heard the news of the court’s decision Thursday, he began telephoning veterans of the tax protest movement with hopes of holding a celebration. Palladino, 74, was a founding member in 1971 of the Norwalk-La Mirada Taxpayers Assn., a local tax watchdog group.

“Congratulations,” he proudly offered to the early foot soldiers of the war against “excessive” taxation. “We won again.”

The banner has been taken up by a new generation--by people like Ray Harbour, 43, of the Orange County Taxpayers Action Network.

Had Proposition 13 been dismantled, Harbour said, it would have affected senior citizens such as an elderly woman who lives across the street from him in Garden Grove. Her taxes, he said, are $506 a year but would have almost quadrupled if the law had been thrown out by the courts.

While sympathetic to the plight of senior citizens and those living on fixed incomes, realtor Allan Gantt said the current tax system hurts first-time home buyers or those wanting to move to a larger home.

“Some people will pay $300 a year in taxes and other people we try to put in next door may pay $3,000,” said Gantt, who represents most of Orange County on the California Assn. of Realtors board. “In a way, it’s not really fair.”

Voters may get a chance to tinker with Proposition 13 sooner--as early as November, when another initiative proposed by Goldberg’s group could be on the ballot.

Dubbed the “tax the rich” initiative, the measure would raise a variety of business taxes and increase income taxes on the wealthiest Californians.

One provision would require reassessment of business property anytime that more than 50% of ownership of a company or partnership changes hands. That could mean much more frequent reassessment for publicly held corporations, as stock ownership turns over through trading.

But many business groups, such as the California Chamber of Commerce, are against any change that would result in a “split roll” that increases property taxes on business while holding down or reducing taxes on homes.

Any attempt to increase taxes on businesses is certain to run into bitter opposition, said chamber President Kirk West.

“It would be a disaster for the economy,” West said. “It would mean a massive tax increase on business . . . and the economy in the state right now is not in great shape.”

West served on a bipartisan commission that last year recommended changes to the state’s tax system in the event the high court decided to throw out the popular 1978 tax-slashing initiative.

He agreed that there were inequities in Proposition 13 and that these ought to be rectified, particularly because of the burden placed on new home buyers.

Although politicians were ready with plans if the Supreme Court had invalidated Proposition 13, Thursday’s decision has dropped the matter from the legislative agenda.

Senate President Pro Tem David A. Roberti (D-Van Nuys) said: “There’s no will here to tamper with Proposition 13.”

Assembly Speaker Willie Brown (D-San Francisco) agreed, saying he foresees no change in the way property taxes are determined despite problems of unfairness.

“It’s unfortunate for new home buyers,” Brown said. “But it is certainly understandable with that court. There is nothing that has been put on any ballot by the conservative wing in this country that will ever be overturned by this conservative court.”

The governor and other Republican elected officials were enthusiastic over the ruling.

“Proposition 13 is essential to our efforts to protect Californians from unfair and crippling property taxes, especially the elderly who live on limited and fixed incomes,” said Gov. Pete Wilson.

Although business generally welcomed the ruling, some interests, such as the state’s home builders, were disappointed.

An official of the Building Industry Assn. of Southern California, which filed a brief opposing Proposition 13 before the Supreme Court, predicted that local governments would come under even greater financial pressure to raise local construction fees.

“Fees are going to rise more and the new home buyer will continue to bear an even higher burden of infrastructure costs,” said Bart Doyle, general counsel for the association.

Although real estate prices in California could have been affected had Proposition 13 been overturned, real estate agents said they had encountered few people in recent months who considered delaying a real estate purchase because of the Proposition 13 case.

The court ruling is likely to have little impact on sales, said Chuck Lamb, president of the California Assn. of Realtors.

“Nothing has changed,” Lamb said. “We’ve been living with it.” But he noted that inequities in tax burdens are likely to get worse rather than better. “That is unfortunate, but it’s the will of the people.”

Times staff writers Frederick Muir, Jerry Gillam and Carl Ingram contributed to this report.