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California Democrats hesitant after call to unwind Prop 13 tax curb

California Senate President Darrell Steinberg smiles in the State Senate Chambers as he and fellow Democrats work to gather the necessary vo
California Senate President Darrell Steinberg smiles in the State Senate Chambers as he and fellow Democrats work to gather the necessary vo

By Sharon Bernstein

LOS ANGELES (Reuters) - A push by California Democrats to undo part of Proposition 13, the measure to limit the growth of property taxes that started a nationwide revolt, appeared to be losing ground on Monday, as leaders in both houses of the state's Legislature distanced themselves from the proposal.

The cool response let some of the air out of a resolution passed at the Democratic Party's state convention on Sunday that called the measure's approach to taxes on commercial property "unfair" and demanding reform.

"We won't do anything in 2013-2014 if at all," said Rhys Williams, a spokesman for the Senate's top Democrat, Darrell Steinberg. "We've just been given that supermajority by the voters who have entrusted us to deliver - so let's deliver that first."

The anti-tax group Howard Jarvis Taxpayers Association, which is named for Proposition 13's original sponsor and opposes any effort to diminish it, didn't appear too worried.

"Pardon me while I give a giant yawn," said Kris Vosburgh, the group's spokesman.

Grassroots activists, emboldened by the Democratic supermajority in both houses of the state legislature, have vowed to take their crusade to the mainstream, and ultimately push reluctant lawmakers to take on Proposition 13.

"It's in their Democratic hearts - it's on their wish list," said political analyst David Mark, editor-in-chief of the website Politix. "But it seems like any real action is not likely to happen any time soon."

Lenny Goldberg, a Proposition 13 critic who helped write the Democrats' resolution, said backers plan a two-year campaign to win over public opinion as well as elected lawmakers.

"Elected officials who are not necessarily paying much attention now will definitely be paying attention in 2015," Goldberg said.

CLOSING A LOOPHOLE

Proposition 13, credited with saving millions of homeowners from facing overwhelming tax burdens during a housing bubble in the late 1970s and early 1980s, has long been considered the untouchable "third rail" of California politics.

Under the ballot measure, property taxes are generally re-assessed only when a parcel is sold, protecting the owner from unexpectedly high bills just because California's notoriously volatile housing market is experiencing a price bubble. The arrangement also protects older homeowners on limited incomes from having to face big annual tax increases.

But critics say that some of the rules - including the assessment scheme for commercial properties and a requirement that no new taxes can pass without a two-thirds majority - put an undue burden on the state's budget, which depends heavily for revenue on income and sales taxes subject to business cycle gyrations.

The resolution Democrats passed at their state convention in Sacramento on Sunday was designed to complement a bill before a state assembly committee on Monday. That bill aims to close what some Democrats see as a loophole that allows commercial property to change hands without being reassessed for taxes if a new owner doesn't gain more than 50 percent of ownership.

However, the measure received only an informational hearing, to be revived - or not - later in the legislative session. Williams said several bills chipping away at Proposition 13 would not be heard this year.

Aaron McLear, spokesman for Californians to Stop Higher Property Taxes, said Proposition 13 supporters should stay vigilant.

"The Democratic Party is very influential and very effective in California, and we don't take it lightly that the supermajority has officially endorsed undoing Prop 13," he said. "That's a serious threat."

Sherry Bebitch Jeffe, a political analyst and fellow at the USC Price School of Public Policy, said elected Democratic leaders will be hesitant to unwind parts of Proposition 13 for a number of practical political reasons, even though many Democrats have complained about it for years.

Not only is Proposition 13 enormously popular, Democrats have been trying to position themselves as being friendlier to business, and increasing taxes on commercial properties would not support that image. Moreover, taking on Proposition 13 could hurt when legislators seek campaign contributions, she said.

(Editing by Eric Walsh)

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