A Back Door Way to Tax Business

Joel Fox

Editor and Co-Publisher of Fox and Hounds Daily


A parcel tax for parks and perhaps another for relieving homelessness is coming to a head in Los Angeles County with efforts to tax property parcels on a square footage basis. This is an obvious attempt to collect more tax revenue from business property owners.

Most business parcels contain larger structures. In Los Angeles, movie studios and warehouses are clearly concerned about the square footage parcel tax approach, as are most commercial property owners.

The L.A. County supervisors voted to put on the ballot a 1.5-cent levy per square foot of building area for parks. Another proposal being discussed is a 3-cent per square foot tax to fund homelessness issues.

The park tax is being spurred by the fact that a property assessment levied to support county parks is coming to an end. County officials want to replace that with a permanent parcel tax—no sunsets—and get it on the November ballot. They expect a voter turnout friendly to tax increases during a presidential election. And, oh, by the way, the parcel tax replacement would bring in much more revenue annually than the assessment it would replace.

Business feels it is a target in a region that has a reputation for being business unfriendly.

When Los Angeles Chamber of Commerce president Gary Toebben testified before the Board of Supervisors against the park parcel tax and its affect on local businesses, he said, “It’s pretty easy to have a cup of coffee when someone else is paying for it.”

According to a Los Angeles Times story, Supervisor Sheila Kuehl responded, “You’ve had plenty of our cups of coffee.” She added that commercial property has enjoyed favorable treatment under Proposition 13, and that if voters want to tax themselves, they have that right.

There are three things wrong with the supervisor’s argument.

First, in implying that business has “had plenty of OUR cups of coffee,” she is asserting that somehow businesses have held on to revenue that rightly belongs to government. The revenue is taxpayers’ money, not the government’s.

Declaring that Proposition 13 favored business is false. Residential and commercial property is treated equally under Proposition 13. That was the case with California’s property tax system prior to Prop 13 and remained the case after Prop 13 became law.

If the argument the supervisor was putting forth dealt with the supposed shift in property taxes from business to residential property, that assertion has also been debunked. The California Tax Foundation issued a paper that states, “Data from the State Board of Equalization, the agency that oversees California’s property tax system, shows that the burden on homeowners has not increased, and that the share of the overall property tax burden borne by homeowners actually has dropped slightly in relation to other taxpayers subject to Proposition 13.”

Finally, to the suggestion that people have the right to vote to tax themselves—the statement is not as simple as it seems. Businesses don’t vote. If the tax is structured in such a way that puts the burden on business to the benefit of homeowners, then the homeowners have more of an incentive to vote yes.

Such back door efforts to raise taxes on business only add to the cumulative negative impact on the business climate as the costs of business rises resulting in increased cost for the businesses’ customers and lack of resources for businesses to create jobs.

 

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