BALLOT MEASURE THREATENS FRACTURE OF PROPOSITION 13
Supporters of higher taxes are hoping an initiative that has qualified for the November 2020 ballot will open a crack in Proposition 13 and draw more revenue from California property owners.
The initiative, titled the “California Schools and Communities Funding Act,” would create a “split roll” for property taxes. Currently, all properties in the state are taxed under the same rules. This measure would split the property tax roll into two categories, residential and commercial, and strip Proposition 13’s protection away from commercial properties.
As a result, business properties such as supermarkets, office buildings, warehouses, factories, shopping centers, auto dealerships, medical offices, self-storage facilities, gas stations, hotels and restaurants would see their property tax assessments raised to market value. For many if not most, that would be a huge jump from their current assessment under Prop. 13, which is based on the purchase price of the property plus annual increases in assessed value capped at 2%. Following this massive tax increase, commercial properties would be reassessed to market value on a regular basis.
This would be a tax increase on California businesses of approximately $11 billion annually, according to the measure’s proponents. Consumers can expect sharply higher prices, as even the smallest donut shop and mall kiosk find their monthly rent raised to reflect the landlord’s higher tax bills.
In 2012, the Davenport Institute at Pepperdine University’s School of Public Policy released a study of a split-roll proposal, which concluded that raising property taxes on businesses by an estimated $6 billion would cost the California economy $71.8 billion of lost output and more than 396,000 lost jobs in the first five years.
Even before that decisive study was completed, split-roll proposals had failed in California on multiple occasions.
In 2000, Assembly Bill 2288 would have required the reassessment of property owned by legal entities, such as partnerships or corporations, every three years. A similar proposal, Senate Bill 17, was considered by the Legislature in 2005, and again in 2010 as Assembly Bill 2492.
In 2003, Assembly Constitutional Amendment 16 would have required the annual reassessment of any commercial property not used for housing or agriculture.
In 2004, the California Teachers Association and actor-director Rob Reiner proposed, and later dropped, an initiative that would have increased the tax rate to 1.5% on non-residential, nonagricultural commercial property.
Between 2005 and 2009, seven more split-roll initiatives were proposed by various individuals. Three of the measures would have increased the tax rate on commercial property and four would have required annual or periodic reassessments. All were dropped before signatures
Proponents of the current split-roll initiative maintain that they are merely closing a loophole, but in fact, the tax treatment of commercial property in California is not a loophole at all. It is the express will of the voters.
Early in 1978, with Proposition 13 headed to the June ballot, then-Governor Jerry Brown and the State Legislature wrote an alternative measure in the hope of convincing voters to reject Prop. 13. Their measure, Proposition 8 on the June 1978 ballot, would have created a split roll and allowed higher taxes on commercial property.
Voters rejected Proposition 8 by a margin of 53–47, while approving Proposition 13 with nearly 65% of the vote.
California has always had a single, unified property tax roll, dating back to the 1800s. Proposition 13 didn’t change that; it simply cut the property tax rate to 1% from a statewide average of 2.67% and put much-needed limits on annual increases in the assessed value of property.
The often-heard argument that Proposition 13 caused a reduction in per-pupil spending on education turns out to be as false as the “loophole” claim.
According to data collected by the National Center for Education Statistics, an office within the U.S. Department of Education, per-pupil spending in elementary and secondary public schools in California has risen nearly every year and is far higher today than it was in the 1970s. Measured in constant 2017–18 dollars, per-pupil spending in the state was $5,474 in 1969–70, $7,116 in 1979–80, $8,798 in 1989–90 and $9,255 in 1999–2000. In 2015–16, the most recent year for which statistics are available, per-pupil spending in California was $11,893.
This data can be found online at https://nces.ed.gov in Table 236.65: “Current expenditure per pupil in fall enrollment in public elementary and secondary schools, by state or jurisdiction; Selected years, 1969–70 through 2015–16.” The true facts contradict any claims that Proposition 13 caused cuts in education spending, and it’s important for voters to know that.
A split-roll initiative, if passed, would be the beginning of the end of Proposition 13. Emboldened tax-hike activists would continue to chip away at Prop. 13’s protections for one group, then another, until there is nothing left.
The Howard Jarvis Taxpayers Association fiercely opposes the proposed split-roll initiative and is readying an intense campaign to inform voters ahead of the November 2020 election. Californians who would like to join the campaign are invited to click here for information on how to volunteer, sign up to receive a yard sign or donate to help pay for TV and radio ads. A printable flyer about the split-roll initiative is available on the website, or call the HJTA offices at 213-384-9656 or 916-444-9950 to request copies.
HJTA is committed to protecting Proposition 13 and all California taxpayers. The fight goes on.