For the past few years, taxpayer advocates, including the Orange County Taxpayers Association, have been sounding the alarm of an impending battle to wipe away Proposition 13 protections for California taxpayers. On December 15, 2017 the first shot was fired. Pro-tax organizations filed a split-roll initiative that will increase the cost to do business in a state already ranked as one of the worst in the nation. They are calling it, “The California Schools and Local Communities Funding Act of 2018,” because really, who would ever be against schools and their local community? But please don’t be fooled when asked to sign this petition in front of your grocery store; this is a tax increase of over $11 billion that will affect every business in California, and will ultimately be passed on to individual taxpayers. And when that isn’t enough money for Sacramento bureaucrats, they will come after your home next.
A split-roll system of taxation assesses properties differently; some are assessed at a higher property tax rate than others, depending on their use. The pro-tax proponents will try to make homeowners believe they are being unfairly taxed and that business and commercial property owners are regularly gaming the system. The problem is that is simply not true. Data from the state shows that business properties now pay a higher percentage of the total property tax burden than when Proposition 13 was enacted in 1978. These properties pay the largest share of property tax under Proposition 13. A study done by the California Taxpayers Association shows that the assessed value of business and non-homeowner properties subject to Proposition 13 has grown at a higher rate than that for homeowner properties. Homeowners do not shoulder the property tax burden for the state.
This tax increase will not be limited to large corporations. Lease costs to small businesses will undoubtedly rise because of higher property taxes and business in California cannot absorb increased costs of this kind without passing them on to consumers. Think about every business you utilize on a regular basis, your dry cleaners, nail salon, pet groomers, doctor, grocery store, hardware store, tax accountant … the list is endless. All these businesses will be forced to pass this over $11 billion tax increase on to you, their customer.
In the past, California voters have been smart enough to say no to split-roll initiatives. It is a return to an unfair and subjective tax policy that fueled the Proposition 13 tax revolt to begin with. Even with Proposition 13 in place, taxpayers in California pay some of the highest taxes in the nation. Under Proposition 13, all homeowners in California can be assured that their initial property tax rate will be set at 1 percent of market value at the time of acquisition, and that the annual increase will be capped at two percent. All homeowners are protected under Proposition 13, whether their home was purchased in 1978 or yesterday. Many new homeowners would not be able to afford to purchase or keep their homes if their property tax were based on a subjective value the county might come up with every year.
Proposition 13 has also stabilized the flow of property tax revenue to local government. It has served as a “circuit breaker” to stop the volatility of market values from affecting the flow of property tax revenues to cities to fund vital local services.
Will Sacramento ever get enough of our hard earned money to finally be satisfied? How hard will they squeeze businesses and taxpayers before our Golden State finally crumbles around us?
Pro-tax advocates think we will simply sign on the dotted line when handed a petition to “help schools and public safety.” But any threat to Proposition 13 should be viewed as an attack on homeowners across California. Because once businesses are out of the way, it is a straight clear shot to come after homeowners next.