While supporters of changing Proposition 13 to increase taxes on commercial property usually focus on raising the tax rate or frequently reassessing property, UCLA Law School professor Kirk Stark has a different idea – broaden the base of business property taxes by reassessing more often but at the same time lower tax rates on property and other business taxes. Stark made the proposal yesterday in Los Angeles at a panel discussion on the split roll that also featured Jon Coupal, president of the Howard Jarvis Taxpayers Association and Gina Rodriquez, Vice-President of the California Taxpayers Association. The event was sponsored by the Bisnow website, which covers people and projects in the commercial real estate business.
Stark suggested reassessing property on a regularly scheduled basis but lowering the 1% tax rate, eliminating property taxes on business equipment and reducing other business taxes. Stark said his goal was to harness the impulse to tweak Proposition 13 and gain sound tax policy rather than ratchet up the tax burden.
However, proponents of the split roll are after more money and lowering a series of other taxes doesn’t fit into the game plan. Nevertheless, Stark’s proposal in another in a line seeking changes to Proposition 13.
Cal-Tax’s Rodriquez argued there was no need to change any aspect of Proposition 13. She said there has been no shift of the property tax burden from commercial property to residential property, citing the fact that residential properties which claim the homeowners exemption saw property taxes increase by 6.8% since Prop 13 passed compared to commercial property increasing 7.3% over the same period.
Rodriquez added that under Proposition 13 property tax is the most stable tax in the state and it produces growing revenue for local governments.
Jon Coupal from the Howard Jarvis Taxpayers Association agreed, pointing out that assessor officials around the state noted that because of the Proposition 13 tax system, which produces steady rising revenue even during difficult economic times because of the way it functions, counties were spared “horrible damage” during the Great Recession.
Coupal said California government is not starving for revenue, as tax increase proponents would have you believe. He said California has the highest income tax in the nation, the highest sales tax, the highest gas tax even before the inclusion of cap and trade fees and property taxes that are ranked in the top half of all states.
The issue of when a business property changes ownership triggering a reassessment of property under Proposition 13 received much attention during the discussion.
Stark complained that the Prop 13 system allows legal entities to own commercial property making it difficult to determine a change in ownership. He mentioned the highly publicized case of a Santa Monica hotel purchased by computer entrepreneur Michael Dell, his wife and others without anyone getting 50-percent of the purchase denying a change of ownership reassessment which a court found legal.
Coupal told of a legislative bill authored by two Democrats last session aimed at reigning in abusive transactions under change of ownership statutes such as the Dell case. The bill failed, Coupal said, because public labor unions urged defeat of the bill as they want a full-blown split roll to change Prop 13, not a corrective fix of the statutes.
Coupal argued there are no loopholes in Prop 13 as critics charge. Proposition 13 calls for reassessment on change of ownership. The legislature wrote the rules on how that occurs, so legislative statutes are at the center of the change in ownership discussion, not the article put in the constitution by Prop 13.
(Full disclosure, I am a member of Californians to Stop Higher Property Taxes)
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