[vc_row][vc_column][vc_column_text]Approved by California voters in 1978, Proposition 13 is one of California’s preeminent laws, stabilizing tax rates for property owners in the state for over 30 years. Passed during a period of time when the demand for housing was high and property values steadily increased year over year, Prop 13 eased exorbitant tax levels by capping property tax rates at 1% of their assessed value and preventing a property’s assessed value from growing more than 2% a year. Because many long-time homeowners could not keep pace with the increasingly high tax rates of the time, Prop 13 overwhelmingly passed with 64.8% of the vote.
Prop 13 protections pertain indiscriminately to both residential and commercial properties; however, since the passage of Prop 13, controversy has arisen over commercial property owners benefiting from the rate protections. A not insignificant portion of California’s population advocate for a change to Prop 13’s protections for commercial property owners by establishing a “split roll” tax that discriminately limits or removes Prop 13 protections for commercial property owners. Proponents of split roll believe commercial property owners should be paying more taxes and that capping tax rates for commercial properties induces added burden on homeowners while negatively impacting local communities that receive tax revenue. Additionally, proponents argue that large corporations are taking advantage of a tax loophole inherent to the law’s provision that a reassessment of property value must only occur at the time a “change of ownership” takes place. The argument claims large corporations are finding ways to evade tax increases by changing ownership in “discrete” ways that won’t trigger a reassessment.
Several Legislative attempts to reform Prop 13 have occurred over the past few years, all failing to pass into law. Most attempted to either establish a split roll tax, redefine “change of ownership,” or reduce established voter thresholds for tax increases. The latest attempt to reform Prop 13 comes from the California State Senate where State Senator Loni Hancock (D- Oakland) recently introduced a Constitutional Amendment (SCA 5) to require the assessment of commercial property values to be based upon current rather than acquired value. Senator Hancock provided the following statement on her website pertaining to SCA 5, “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.” Hancock is backed by a number of Prop 13 activists hoping to gain increased funding for social programs and education by accelerating reassessments on commercial property, thus increasing tax revenue for the state.
Opponents to Senator Hancock’s proposal counter-argue that the majority of commercial property owners are not supposed “tax evading” corporations but rather, are hard working small business owners. Opponents believe a significant increase in commercial property tax rates will likely cause many small businesses to cut jobs, benefits, or raise prices to keep pace with the added costs. For small businesses that do not own property, the increased rate is likely to be passed from owner to renter through higher rent costs. Donna Duperron, President and CEO of the Torrance Area Chamber of Commerce, says that of the Chamber’s nearly 800 members, well over 500 are small business owners. In regards to split roll she comments, “The majority of the population are not small business owners and are not privy to the amount of work and sacrifice it takes to operate a business in California. Unfortunately, split roll efforts are another example where a majority group seeks to impose a targeted, discriminatory tax on a minority tax base.”
SCA 5 faces tough odds as it would require a 2/3 vote of the Legislature to pass. With several anti-Prop 13 bills failing to pass since 2012 while state Democrats enjoyed a supermajority, it seems unlikely SCA 5 will pass in 2015 since Democrats would need to sway a few Republican votes. Regardless, if SCA 5 were to pass, voters still have the final say. California’s constitution stipulates that any Legislative attempts to amend the state’s constitution must be approved by a 2/3 vote of the public. But SCA 5’s fate may be inconsequential. A record low number of voters turned out for the gubernatorial election in 2014, which means the signatures required to place a citizen initiative on the 2016 ballot is also at a record low. Several groups have undertaken campaigns to place measures on the 2016 ballot, to include Prop 13 activists. A battle at the ballot box over one of the state’s most coveted (and controversial) laws may be inevitable.
The TACC is committed to #DefendProp13 and #SupportSmallBusiness in the Torrance area.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator height_2=”25″ height=”25″ show_border=”yes_border”][/vc_column][/vc_row][vc_row][vc_column width=”1/4″][vc_column_text][/vc_column_text][/vc_column][vc_column width=”3/4″][vc_column_text width=”1/1″ el_position=”first last”]
Brandon is the Governmental Affairs Coordinator for the Torrance Area Chamber of Commerce. His primary responsibilities include facilitating the Chamber’s Governmental Affairs Policy (GAP) group, planning Chamber events with legislators, and facilitating the Chamber’s Political Action Committee (PAC). Feel free to contact him at any time.[/vc_column_text][/vc_column][/vc_row]