For Republicans nurtured on a diet of tax cuts, a nightmare is coming to pass: The most immediate impact of Democratic supermajorities in both houses of the Legislature is to put Proposition 13 on a hit list.
But not directly.
There is no single plan — yet — to toss out or rewrite the 1978 constitutional amendment that cut property taxes for homes and businesses by 57 percent, rolled back new assessments and choked off billions of dollars destined for schools and local services. However, talks already are under way in each house to prepare a taxation initiative for next year or for the November 2016 statewide ballot to coincide with the high-turnout presidential election.
But major legislation is nibbling at critical pieces of the landmark initiative, driven by voters at the local level unhappy that projects were blocked — even though they received decisive majority votes but less than the 66.6 percent required by Proposition 13.
“We all have examples of communities that have tried to raise their own monies and have come up short with even a 66 percent vote. What’s motivating all of us is that if a community wants to raise its taxes to support a needed project, then it ought to be able to do that,” said Lois Wolk, chair of the Senate Government and Finance Committee. “We certainly are able to approve statewide taxes with a majority vote, why do we restrict local communities to the two-thirds vote? It doesn’t make any sense.”
In one dramatic example, a Los Angeles proposal to raise money for transportation programs received 66.1 percent of the vote, but fell shy of the 66.6 percent threshold by some 16,000 votes. “Only in California can 66 percent be considered a loss,” Supervisor Zev Yaroslavsky, who supported Measure J, told a reporter at the time. “It’s an absurd threshold that’s been imposed on us.” Over the years across the state, scores of local measures to raise money reached the majority-vote threshold failed to receive two-thirds votes.
At least seven proposed constitutional amendments to reduce the local vote threshold to 55 percent have emerged in both houses — two in the Assembly and five in the Senate. They are ACA 3 by Assemblywoman Nora Campos, D-San Jose; ACA 8 by Bob Blumenfield, D-Woodland Hills; SCA 3 by Sen. Mark Leno, D-San Francisco; SCA 4 by Sen. Carol Liu, D-La Canada Flintridge; SCA 7 by Wolk; SCA8 by Sen. Ellen Corbett, D-Hayward; and SCA 9 by Corbett.
All seek to reduce the threshold to 55 percent. One, Liu’s SCA 4, came in response to the L.A. vote on the transportation.
The measures, which require voter approval, seek to make it for easier locals to approve taxes for school districts, transportation projects, libraries, economic development and community projects.
Another bill, not an amendment, seeks to capture new revenue from companies when they change ownership, and another would nullify a court decision that blocked a school district vote in Alameda County.
So why now, after 35 years, is Proposition 13 under the gun?
“Particularly in light of there being 38 new Assemblymembers this year, we thought it was important to cut through the rhetoric and have a discussion on Prop 13 and the threshold-lowering proposals,” said Assemblymember Raul Bocanegra, chair of the Assembly Revenue and Taxation Committee. “I view this as an opportunity for Assemblymembers to ask questions and gather information, before we start hearing all of the proposals later this month. It’s critical that members have an understanding of what Prop 13 and the two-thirds thresholds actually do and what the real impact would be of some of the proposed changes.”
The initiative in June 1978 was approved nearly 2-to-1, with majorities of approval in 55 of California’s 58 counties. The counties opposed were Yolo, San Francisco and, surprisingly, Kern County, where it went down by a razor-thin 300-vote margin.
Surveys since then show support statewide for Proposition 13, although support for key provisions of the initiative — the two-thirds threshold, for example — has been uneven.
“PPIC did a poll in December and voters’ attitudes have not changed,” said political consultant Aaron McLear, representing opponents of changing Proposition 13. The coalition includes the California Chamber of Commerce, commercial property representatives, small businesses and the Howard Jarvis Tax Association has formed to fight changes to Proposition 13.
“But what has changed is that they (Democrats) now have absolute power in the Legislature,” he added. There seems to be a lot more serious effort to do something to Prop. 13 by lowering the (vote) threshold, but the thing is, people still don’t want to change 13,” he added.
More than the partisan lineup has changed, according to Lenny Goldberg of the California Tax Reform Association, which is supported in part by labor. “The transportation folks are influential and powerful, business groups, construction, transportation advocates — all are wanting the two-thirds vote changed.”
Joel Fox, an anti-tax advocate who heads a small-business group and publishes the Fox & Hounds blog, agrees.
He noted that public support for Proposition 13 is nearly 2-1, “the same two-to-one margin that passed it 35 years ago. In other words, the Legislature has the two-thirds vote on their (Democrats’) side and we have a two-thirds vote of the people on our side.”
But while Proposition 13 has general support statewide, individual provisions are taking hits — such as the supermajority required for local voters, and the taxation of residential and commercial property at the same level. Opponents of Proposition 13 have long called for a “split roll” or “smart roll,” in which residential property be taxed at a different, lower rate than business property that produces revenue.
The term “split roll” is a fighting slogan for some.
“It’s a button that can get everybody upset. It’s a button that gets pushed and then you don’t have a substantive discussion,” Goldberg said, whose group favors taxing residential and business property differently.
“Ideally, what I want to have is a negotiated tax reform package that occurs in the Legislature and everyone says is good for California, as opposed to a ballot measure,” he added. “I’m hoping to have a substantive discussion on the issue and how we fix it. The ideal situation is have a package tied to a ballot measure and they all occur together.”
Opponents of a split roll note that it was in existence before Proposition 13 was approved, and believe that uniformity is preferable to a differentiated tax. Years ago, there were cases of corruption involving split rolls, in which “businesses paid off assessors” to get exemptions and favorable assessments, Fox said.
“We eliminated that problem with Prop. 13,” he said. “You start going down a slippery slope with a split roll. “Minnesota has 81 exemptions for property taxes, and that’s a dangerous road to go down. We should keep the formula we’ve had for a long time.”
Ed’s Note: This article also appeared in CaliforniaCityNews and is available here.