Politics won over good policy, and now Californians face even more taxes

Rex Hime

Rex Hime is the president and chief executive officer of the California Business Properties Association, rexhime@cbpa.com. He wrote this commentary for CALmatters.

Editor’s note: This commentary is a response to “After 40 years, let’s finally reform Proposition 13,” March 31, 2019.

Californians complain their state is unaffordable. The cost of living is at a record high, housing prices are astronomical, and taxes continue to rise.

A recent Public Policy Institute of California survey found that 63% of likely voters believe they pay more in state and local taxes than they should and 80% believe California’s tax burden is above average.

They are, without a doubt, correct. California is one of the highest taxed states in the nation. According to the nonprofit Tax Foundation, California has the highest state sales tax and personal income tax, and the second highest gas tax. It’s no wonder that so many families are struggling to make ends meet.

Fortunately, there is one tax left that isn’t sky-high in California – the property tax.

Voters passed Proposition 13 in 1978 due to steep property tax increases that were forcing businesses to shut their doors and pushing families out of their homes. Proposition 13 changed the way properties are taxed in California by:

• Limiting property taxes to no more than one percent of the assessed value for both residential and business properties.
• Capping annual increases in assessed value at two percent per year.

Four decades later, homeowners and businesses have certainty about property taxes and are protected from being taxed out of their homes when property values rise quickly.

While Proposition 13 continues to protect taxpayers, there is one provision in the implementing language passed by the Legislature after the voters passed Proposition 13 that allows some properties to avoid reassessment, even when the ownership fully changes hands. This was not the intent of Proposition 13.

The business community has spent many years sponsoring legislation that would fix this language and raise an estimated $70 million per year.

In 2014, my organization, the California Business Properties Association, and the California Business Roundtable sponsored Assembly Bill 2372 by Democratic Assemblyman Tom Ammiano of San Francisco. This bill would have fixed the “change of ownership” language by triggering reassessment when at least 90% of a property’s ownership changes hands within three years.

Unfortunately, special interests who have spent decades trying to undo Proposition 13 saw the bill as something else—a political liability. They knew that leaving the problem unfixed would be a good talking point in a campaign to undo Proposition 13 and implement a split roll property tax in California. A legislative solution would hurt them politically, so they pushed hard to kill the bill.

AB 2372 never made it to the Gov. Jerry Brown’s desk.

Because politics won over good public policy, local governments and schools are missing out on millions of dollars’ worth of property taxes every year that they would have received if AB 2372 had passed.

Now, Californians, who just told the PPIC they feel overtaxed, will see an initiative on the November 2020 ballot that would raise property taxes by $11 billion, and dismantle Proposition 13 by requiring reassessment of business properties every three years, whether the property is newly purchased or not.

Most importantly, raising property taxes on businesses means they will pass on the costs to every Californian by increasing prices on just about everything we buy and use, from diapers and day care to gasoline and groceries.

That’s the last thing hardworking families need.