55+ cap gains exclusion was repealed like 25 years ago?
It isn't cap gains exclusion.
it is a California thing. If you meet certain criteria you can sell your current home, buy another home in the same county and transfer the base tax value from the home being sold to the newly purchased home. A few counties support inter-county transfers.
The intent is to remove an impediment for an empty nester from selling their larger home to downsize because of the big tax increase.
edit: in the end, the state makes out, otherwise owners don't move because they can't or don't want to pay the higher taxes.
for example.
Scenario 1:
Owner has a home valued at 1M house with tax base value of 500K and pays taxes on 500K.
New buyer comes along and can't find a larger house for sale and settles for a smaller house at 800K.
State gets tax revenue on 1.3M
Scenario 2:
Owner of 1M house buys smaller house for 800K, transfers the 500K basis keeps paying the same property tax.
New buyer buys the house at 1M and gets a tax basis of 1M
State gets tax revenue on 1.5M
In the scenario above, the 300K reduction in tax basis lowers the property tax about 3K per year.