Split-roll property tax introduced in Senate

property tax houseOn Wednesday, California State Senators Loni Hancock, D-Oakland, and Holly Mitchell, D-Los Angeles, introduced new legislation to reform Proposition 13. Senate Constitutional Amendment 5, titled the “Property Tax Fairness” amendment, would make changes to Prop. 13 by assessing commercial and industrial properties at their current market value.

“We’re here to talk about SCA 5, new legislation that will finally reform our commercial property tax system and make it fair,” said Sen. Mitchell, during the announcement of the new legislation. “We have large corporations and wealthy commercial property investors that have used loopholes in the law to avoid paying their fair share. We have large, multi-billion dollar corporations that actually have a competitive advantage over smaller start-ups simply based on when a property was purchased. In short, we have a few businesses that are benefitting from far lower taxes than their neighbors and competitors. That’s what this legislation is all about.”

The bill authors stressed that SCA 5 “would finally make California’s property tax code fair by assessing commercial and industrial properties at their market value, after a phase-in period.” They also stated the legislation would “provide significant tax relief for businesses, protect homeowners and renters from any changes to their property tax status, and create strict new accountability measures for new revenues.”

“This legislation will address flaws in Prop. 13 that have allowed a minority group of wealthy corporations and commercial property owners to dramatically lower their tax bills and shift that responsibility onto homeowners and renters,” said Senator Hancock in a prepared statement. “Our homeowners are now being asked to pay the vast majority – 72 percent – of property taxes, while the commercial side pays only 28 percent. In 1978 when Prop. 13 passed, each paid about 50 percent. That’s not fair, and it has strained the community services our residents rely on.”

Opposition to SCA 5

Other legislators are not so impressed.

“I am disappointed, but not surprised, that the majority party would introduce legislation to weaken Prop. 13. This assault on California’s most important taxpayer protection measure not only threatens to raise taxes on struggling small businesses, but the net effect would be higher prices for consumers and fewer jobs for hardworking families,” Assemblywoman Young Kim, R-Fullerton, said in a statement.

Senate Republican Leader Bob Huff, R-San Dimas, echoed the sentiment in a release:

“There will be a ripple effect. Small businesses will be hit hard by this tax increase. They may pass on the cost to California families or take the loss and see if they can survive.

 

“What California families need are good paying jobs, not new taxes on small businesses. Increasing taxes on employers by $9 billion dollars annually will mean less money to hire and retain workers. Taxing small businesses will not raise anyone’s wages, will increase consumer costs, and is likely to drive businesses out of the state.”

Teresa Casazza, president of the California Taxpayers Association and co-chair of Californians to Stop Higher Property Taxes, said in a statement, “SCA 5 is an attack on property owners, and just by being introduced it sends a damaging signal to anyone thinking of starting a business in or moving a business to California. Lawmakers introduced more than $132 billion in new taxes and fees in the current legislative session and SCA 5 would only add to that unfathomable number.”

Poll results on a split-roll tax initiative

In May, the Public Policy Institute of California released survey results regarding the issue of changing Prop. 13 and moving towards a “split-roll” tax on property, defined as “taxing commercial properties according to their market value while leaving limits on residential property taxes intact.” As Joel Fox noted in a previous CalWatchdog story, “50 percent of likely voters favored the proposal while 44 percent opposed.”

A different poll from the California Business Roundtable released in June revealed that over 72 percent of all Californians would approve Prop. 13 in its totality if it were to be voted on again. Only 21 percent of the respondents were interested in changing to a split-roll tax on property.

SCA 5 requires a two-thirds majority vote in both legislative houses before it can be placed on the 2016 ballot. Two split-roll ballot initiatives have been voted on in the state of California — Prop. 8 in 1978 and Prop. 167 in 1992 — but both propositions failed.

The legislation has since been referred to the Senate Governance and Finance Committee.

10 comments

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  1. Ronald Stein
    Ronald Stein 12 June, 2015, 06:02

    SCA-5’s Split-roll property tax introduced in the Senate is another “hit” on businesses in California’s unfriendly business environment. This will help keep California near the top of the list as one of the most business unfriendly states in the union.

    Rather than continuing to attack businesses with over regulations, over taxation, and uncontrollable fees that trickle into every infrastructure and into the products from every industry that are the basis of our economy and standard of living.

    Over regulations, over taxation, and uncontrollable “fees” are slight inconveniences to those making the big bucks, but the California financially challenged will continue to disproportionally pick up the costs “camouflaged” at businesses.

    Reply this comment
  2. Richard Rider
    Richard Rider 12 June, 2015, 08:05

    A Defense of Proposition 13 Property Tax Revenues
    by Richard Rider, Chairman, San Diego Tax Fighters
    Updated 6 April, 2015
    Blog: http://www.RiderRants.BlogSpot.com

    When it comes to gathering sufficient property taxes, Prop 13 is no problem at all – except for profligate spenders. Look at the history of my San Diego County – a history which pretty much reflects the history of property taxes in the urban/suburban counties that hold over 85% of California’s population.

    According to San Diego County, in 1977 – the year BEFORE Prop 13 took effect (when everything was working great, according to Prop 13 critics) – our countywide property tax revenue was about $639 million. In the 2013-2014 fiscal year, our county treasurer reports real estate property tax revenues of $4.932 BILLION. Hence for every property tax dollar collected in 1977, the county in 2013-14 collected $7.72. And BTW, according to the County Assessor, since Prop 13 passed, 97% of the pre-Prop 13 county owner-occupied homes has changed hands (and been reassessed) at least once.

    During that time frame, our county population has grown almost 90%, and inflation has gone up about 290%. Hence property tax revenues today are higher than the bloated PRE-Prop 13 year, even after adjusting for inflation and population growth.

    California in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But CA property taxes per owner-occupied home were the 10th highest in the nation in 2009.
    http://taxfoundation.org/sites/taxfoundation.org/files/docs/TaxFoundation_2015_SBTCI.pdf page 73
    and
    http://www.taxfoundation.org/taxdata/show/1913.html (2009 latest year available on homes)

    To see how CA ranks numerically against the other states on tax, regulation, litigation, utility costs and other economic factors (with confirming URL’s), go to: http://www.TinyURL.com/CA-vs-other-states and read the latest updated version of my dreary fact sheet “Breaking Bad – CA vs. the Other States.”

    ***

    ANOTHER PROP 13 BENEFIT: It turns out that, under Prop 13, property tax revenue is FAR more stable than our other forms of CA tax revenue. During the recession, income tax revenue plunged, and sales tax revenue significantly declined.

    But property tax revenue seldom goes down AT ALL. Since the year Prop 13 passed in 1978, San Diego County real estate property tax revenue has ALWAYS gone up every year but two – in the 2008-09 crash the property tax revenue dropped a miniscule 0.8%, and in 2010-11 it dropped 0.6%. In 2013-14 it’s up 3.0%.
    Not one person in a thousand knows about this revenue stability. The press has not covered these amazing facts.

    Revenue is up because Prop 13 has the little-known added benefit of smoothing out real estate property tax revenue from year to year. Many properties this past year (generally those purchased prior to 2003) had their property tax go up 2%. Add to that the property resales, property improvements, “catch up” reassessments and new structures (all of which establish new tax assessment levels), and the revenue stayed rather constant in the teeth of our economic downturn.

    Consider what happens without Prop 13 protection: In the real estate boom years from 1998 through 2005, property taxes would have SOARED. Even WITH the Prop 13 limitations, San Diego County property tax revenue collection during this period STILL rose 111%. But then in the next four years, dropping property values would have caused a dramatic plummet in property tax revenues – revenues that governments would now be hooked on – just like we see with our volatile sales taxes, and especially with our hugely erratic income tax revenues. Property tax revenues are CA governments’ one steady, reliable source of income – thanks to Prop 13.

    NOTE: Statistics provided above – plus a year-by-year summary since 1975 – are on my verifiable spreadsheet posted at –
    http://sandiegotaxfighters.com/blog/wp-content/uploads/2015/01/SD_County_Property_Tax_Revenue_1975-2014.pdf
    —30—

    Additional Thoughts about Prop 13
    by Richard Rider

    For 30+ years since the passage of Prop 13, advocates for higher taxes have complained about inadequate CA property tax revenue. But the one thing ALL such critics have in common is that they NEVER show the actual revenue shortfall. They never provide the figures.

    They never compare the property tax revenue collected in 1977 (the year before the big Prop 13 drop when everything was supposedly hunky dory) with the property tax revenue being collected today.

    Why? For one of two reasons. And ONLY one.

    1. They don’t know the figures. Never checked. Even supposed financial gurus haven’t a clue what the numbers are. They just INTUITIVELY know that the revenues are woefully inadequate. After all, this “massive revenue shortfall” has been endlessly cited by fellow leading California progressives for decades, so most liberals mindlessly conclude that it MUST be true.

    2. They DO know the figures. But they intentionally omit them, as such figures DESTROY their argument. For it turns out – compared to property tax revenue collected the year BEFORE Prop 13 passed – such tax revenues have grown faster than inflation and population COMBINED.

    Much of the complaining about Prop 13 has to do with its lack of “fairness.” Property is taxed by a formula that caps the yearly tax increases, resulting over time in long-time property holders paying less property tax than newer purchasers of similarly valued property. But is “fairness” the issue? I think not.

    We could have this discussion if the idea were to somehow “equalize” the property taxes in a revenue neutral fashion (though I still disagree with the change). But the proponents’ goal is to make the senior property owners and commercial properties pay MORE property taxes – with little or no relief for the newer residential property purchasers. Obviously this “fairness” objection is just a ruse to further raise property taxes – and, as I’ve demonstrated above, Californians pay quite enough property taxes, thank you very much.

    Are commercial properties not paying their “fair share”? You decide. In 1979-80, businesses paid 58.2% of all CA property taxes. In 2011-12, they paid 60.3%. Commercial properties pay a HIGHER percentage of the property tax than they did 32 years ago!

    As to commercial property which “turns over” less often than residential property, a discussion of raising property taxes faster needs to include consideration of our plethora of business “fees” and our already high state corporate income tax – highest west of the Mississippi (except for Alaska) – our economic competitors. Our state’s businesses are viewed as ATM machines by our greedy California state and local governments. Raising commercial property taxes faster would only accelerate the business migration out of the state – while further deterring any business from considering relocating IN to California.

    Still think our California property taxes are too low? Consider this: The average impact fee in CA for single-family residence in 2012 was $31,100 per unit, nearly 90 percent higher than the next most expensive state and 265 percent higher [more than TRIPLE!] the norm among jurisdictions that levy such fees, which typically pay for capital improvements, like water and wastewater facilities, required by a new development. Many states and localities on the eastern side of the Sierras have no such fees at all. To add insult to injury, that “fee” becomes part of the price of the home or apartment – the base on which your annual property taxes are calculated.

    These fees also impact multifamily housing; the state’s fees on multifamily units averaged $18,800 – 290 percent [almost quadruple!] above the average outside California – again, not counting the states and cities where such fees are not levied at all. http://www.newgeography.com/content/003882-california-homes-require-real-reach
    —30—

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  3. Ulysses Uhaul
    Ulysses Uhaul 12 June, 2015, 08:41

    Summer moving specials.

    Going East? Try our packet of fast food coupons! Going South? We throw in our catalog of barbeque joints!

    And remember te best is yet to come…..hasta la whatever!

    Reply this comment
  4. desmond
    desmond 13 June, 2015, 04:25

    How about Cal gov’t retirees moving West, think lemmings?

    Reply this comment
    • Ulysses Uhaul
      Ulysses Uhaul 13 June, 2015, 16:44

      Why am I depressed after reading stuff from Desi……..reminds one of our departed doomer El Collapso….miss the lad.

      Reply this comment
      • SkippingDog
        SkippingDog 15 June, 2015, 11:51

        El Collapso, OCobserver, Rex the dunder dog, Donkster, where have they all gone? Maybe their old dial up internet service isn’t working these days.

        Reply this comment
        • Ulysses Uhaul
          Ulysses Uhaul 15 June, 2015, 15:38

          Sad…but miss my medieval-style beatings from these kooks. Since we must endure the new CWD format…things ain’t been the same….less emotional dirges and doomer tomes.

          One breath of fresh is Richie from that tourist dump San Diego…he lathers up some rather neat stuff requiring quantitative physics or the Hubeee telee to digest…so stimulating!

          Reply this comment
    • SeeSaw
      SeeSaw 16 June, 2015, 10:31

      Try to stay on topic Des–there are plenty of other forums where you can keep venting your disdain toward public-sector retirees.

      Reply this comment
  5. SeeSaw
    SeeSaw 16 June, 2015, 10:25

    Whatever happened to the idea of closing the loopholes in Prop.13 that allow commercial entities to skip the reassessment when the property changes hands? Putting in a new law, requiring the assessment of commercial property yearly would be going back to square-one, pre-1978. That would be just a start for going back to square-one with residential properties too.

    This proposed measure leaves me cold. Close the commercial, property loopholes that currently exist in the original Prop. 13 or forget it! No entity, private or public, should have to go back to yearly assessments-circa, pre-1978–a nightmare for all property owners in CA!

    Reply this comment
  6. desmond
    desmond 17 June, 2015, 04:43

    Nope, I will stay right here. Don t worry about anything. My generation will fix things. You will be long gone.

    Reply this comment

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