California’s cap on commercial property taxes benefits very few people and unfairly keeps resources from going into schools.
By Angela Glover Blackwell and
Angela Glover Blackwell is the founder in residence and host of the podcast Radical Imagination, PolicyLink, email@example.com.
Anthony Thigpenn, Special to CalMatters
Anthony Thigpenn is the president and founder of California Calls, firstname.lastname@example.org.
People have been protesting in streets across America to force a reckoning with racism. But racial inequity exists in many structures of society, including our tax and property ownership systems that have blocked people of color from pathways to building wealth.
Despite our progressive values and diverse population, California plays a leading role in this ugly history. Among the nine states that cap commercial property tax, California’s cap is the oldest and most severe. It was created while families of color face credit restrictions limiting their purchase of property, just 30 years after “whites-only” deed restrictions were invalidated and 19 years after the enactment of fair employment and housing laws.
As voters consider Proposition 15, the Schools and Communities First Initiative, recent research from UC San Diego offers further evidence that a yes vote will dismantle a system holding back people of color and help make right past wrongs.
Established in 1978 through Proposition 13, California’s cap on commercial property tax freezes the assessed value at the time of purchase and allows for a maximum 2% increase in assessed value per year. Schools and Communities First would retain these benefits for homeowners and small business owners but allow commercial properties worth $3 million or more to be taxed at their current market value. The change would generate nearly $12 billion a year for schools and local governments, with more than 90% of the additional property tax revenue coming from just 10% of the highest value properties.
How does the choice over Schools and Communities First relate to racial equity?
The research found that racial income gaps are wider in the nine states – Arizona, Arkansas, California, Florida, Idaho, Michigan, Oklahoma, Oregon and South Carolina – with commercial property tax caps compared to the other 41, and these racial income gaps widen over time.
For the first time, we now know how much California’s cap on commercial property tax has contributed to income inequality. If Proposition 13 only applied to housing, the income gap between white and Black families would be reduced by 12% and by 23% between white and Latino families. A chief reason is that more resources would be available to fund local workforce services – such as education, public transportation or public libraries.
While the idea of a cap on commercial property sounds neutral, the reality is that it overwhelmingly benefits white families who are four times more likely than Black or Latino families to own any share in commercial property.
Most families, regardless of race or ethnicity, do not have any financial interest in commercial property. Slightly less than 1% of white families do. Among communities of color, the percentage is more minuscule – 0.22% among Black and 0.27% among Latino families.
The wide disparity in commercial property ownership translates into wide wealth disparity. When spread across all families, including those that do not own any commercial real estate, an average commercial property value of $27,025 is shared among white families. This is over six times more valuable than the same average for Latino families ($4,074) and 65 times more than the same average for Black families ($417).
Translation: California’s cap on commercial property taxes benefits very few people. It disproportionately and unfairly keeps resources away from going into the schools and communities that need it most. Eliminating this source of structuralized racism is essential to overcome California’s legacy of racial inequality.
The arc of history bends toward justice but, this November, Californians can give justice a nudge. A vote for Proposition 15 is a vote for racial equity.
CalMatters Guide to the propositions: Proposition 15: Business property taxes