Once thought of as a sacred cow, Proposition 13, the tax revolt measure passed in 1978, is now under attack.
Schools and Communities First, a coalition of nearly 300 groups and leaders, has qualified an initiative for the Nov. 2020 ballot that would lift caps on property taxes for commercial and industrial properties.
The coalition says that if the initiative is approved, it will reclaim more than $11 billion a year for K-12 schools, community college, cities, counties and special districts that support everything from parks to libraries.
PPIC also found that 65 percent of the state’s likely voters believe Proposition 13 has turned out to be a mostly good thing for the state.
But taxpayer advocates say the measure would hurt the economy, drive businesses out of state and lead to job losses.
Proposition 13 limits property taxes for both homes and businesses to 1% of the property’s taxable value and prohibits the taxes from going up more than 2% per year until the property is sold. In this way, property owners who have held on to their land for many years often pay much lower taxes than new buyers.
The initiative would create a “split roll” system, leaving in place the caps on home property taxes while removing the protections for commercial and business properties. Commercial and business properties could be taxed at fair market value.
But getting voters to approve it may be an uphill battle.
According to a June report from the Public Policy Institute of California, support for a split roll among likely voters is at its lowest point since the institute began asking the question in 2012, with only 46% in favor.
The institute also found that 65% of the state’s likely voters believe Proposition 13 has turned out to be a mostly good thing for the state.
“They have been taking this into their pockets. It’s time for them to pay their fair share.” — Helen Hutchison
Helen Hutchison, president of the League of Women Voters of California, who supports the initiative, said schools and communities are desperately underfunded and need the additional revenues that would come from lifting the property tax caps on commercial and industrial land.
She stressed that the measure would mostly affect a fraction of very large legacy companies.
“It’s companies like Chevron and Shell,” she said. “They have not been giving us a discount because they have been paying lower property taxes. They have been taking this into their pockets. It’s time for them to pay their fair share.”
Carol Kocivar, past president of the California PTA and current legislative advocate for the group, said the initiative is a “smart way” to raise money for the state’s schools.
She pointed to the September study “Getting Down to Facts II” coordinated by Stanford University and disseminated by Policy Analysis for California Education which said that California was $25.6 billion short in 2016-17 of the money needed to meet goals set by the state Board of Education. While California spent about $12,204 peer student, the state needed $16,890 per student to meet the state board’s goals. Connecticut, New Jersey, New York and Massachusetts spend $16,890 per pupil.
“Schools are as flush now as they’ve been in the last decade.” — David Wolfe
David Wolfe, legislative director for the Howard Jarvis Taxpayer Association, named after the principal proponent of Proposition 13, said small businesses will suffer if property tax caps are limited – some may see rents go up if they are leasing space at malls which face steep property tax increases. “You start tinkering with it for commercial properties, you’re going to kill job growth, you’re going to kill growth in the economy,” he said.
He also argues that if the initiative passes, Proposition 13 reformers may try to lift caps on homes next.
Wolfe points out that education funding has increased by 20 percent when adjusted for inflation and population growth since Proposition 13 passed. “Schools are as flush now as they’ve been in the last decade.”
David Kline, vice president of communications and research for the California Taxpayers Association, said the initiative ignores the reality that California already has the second worst business tax climate in the country after New Jersey, according to the Tax Foundation.
“It’s more expensive to do business here already,” he said. “When you increase costs, it becomes a bigger problem. It’s going to ultimately be paid by the people – people of all walks of life. It’s not a few rich evil corporations that are going to get soaked by this. It is everyone paying higher prices.”