Since Proposition 13 was passed in 1978, California properties are taxed based on a value tied to the year they were purchased and are only reassessed upon transfer of ownership or change of control if the title is held in a legal entity. Values cannot increase more than 2% annually, no matter how much its value rises on the market. Prop 13 has come under fire many times over the last four decades, but faces perhaps its toughest test after an initiative qualified for the November 2020 ballot that could dismantle the protections for businesses. Under the proposed initiative, protections for residential properties would not change, but local governments would be able to levy taxes on commercial and industrial properties based on market value, a process known as “split roll.” Ending the state’s restrictions on commercial and industrial properties would increase tax receipts for cities, counties and school districts by as much as $10 billion a year.
According to the LA Times, proponents of the initiative say there has been a generational struggle to support public services since Proposition 13’s passage in 1978 and want to end the inequity in our property tax system they believe has drained resources. By contrast, business groups and taxpayer advocates are already digging in to defend their interests from a tax increase they contend would worsen a business climate consistently ranked among the worst of any state in the country because of California’s high corporate, income and sales taxes.
Activist groups have talked about charging businesses higher property taxes for years. But they’ve been cowed by intense opposition from the business community and voters’ allegiance to Proposition 13. Before now, no split-roll initiative had qualified for the ballot. Jon Coupal, the head of the Howard Jarvis Taxpayers’ Assn., the anti-tax organization whose namesake founder was the author of Proposition 13, said it might seem like California’s changing demographics and political attitudes would weaken Proposition 13’s hold on the electorate. “This is not the California of 1978,” Coupal said. “It has become more progressive.”
For the full article from the LA Times, click here.