Would You Believe? GOP Bill Would Raise Tax Revenue—Democrats Say No

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Here’s a shocker—Republicans, taxpayer groups and business associations pushed a bill that would raise tax revenue but it was rejected by the Democrats in the Senate Governance and Finance Committee on the advice of unions, interest groups and others who always pine for more tax money.

Well, it is not really a shocker if you know the politics behind it. We’ve seen this particular play before. It employs the same cast of characters.

The bill was Sen. Pat Bates’ SB 1237. The bill’s intent was to clear up legislative created ambiguity when a change of ownership of commercial property triggers a reassessment of that property for tax purposes.

Certain sales of commercial property, which don’t constitute a single entity owning a 50 percent majority, are considered a non-change of ownership transaction under current law—even if 100% of the property changed hands. According to Proposition 13, a change in ownership triggers a reassessment, which produces increased property taxes for the county in which the property is situated.

The bill had support from business organizations such as the California Business Roundtable and the California Business Property Association, along with an endorsement from the Howard Jarvis Taxpayers Association, the protector of Proposition 13.

The bill, if passed, is estimated to raise $50 million in new revenue. Why wouldn’t public unions and so-called social justice groups want that increased revenue when buildings change hands?

The answer is simple: the groups opposing SB 1237 want more.

Check out the list of opposition to the bill listed in the committee analysis. It is a who’s who roster of the groups that back a split roll property tax initiative now in circulation including the League of Women Voters, SEIU, and California Federation of Teachers among others. If a split roll were to pass raising taxes on business properties that could mean up to $11 billion in new tax revenue every year. Opponents of the senate bill want billions, not mere millions, to cover pensions, salaries, and program costs.

Jon Coupal of the Howard Jarvis Taxpayers Association commented on the defeat of the bill, “Killing this bill shows that progressive tax and spend interests don’t want to fix how Proposition 13 is interpreted, but they’d rather maintain the status quo in order to advocate for a larger split roll tax increase on commercial property. Rather than fight for the better policy of fair property tax assessments, they would rather play politics with this important issue.”

Not for the first time a bill was introduced to reform the change of ownership provisions in the tax code. A widely publicized sale of a Santa Monica hotel in 2006 in which the new owners fashioned the transaction to avoid increased taxes prompted legislation to alter the practice. That bill, carried by two Democrats, actually advanced in committee until organizations that eagerly want more tax revenue twisted the arms of legislators they supported to put a kibosh on the bill.

A split roll was in the offing and the interests that want billions in new tax revenues wanted to use the example of the Santa Monica hotel sale in advertisements to support the split roll.

They still have the hopes of making use of the hotel sale—but it is possible they have waited too long. Plans for remodeling the hotel, if moved forward, would up its assessment and property taxes and take away the example they hoped to use. Meanwhile, the effort to deal with the glitch in the tax code and the millions in new taxes have gone by the boards.

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