The newly filed split roll initiative is even worse than the last.
To be more precise, it’s even more complicated. Rather than splitting the property tax rolls between commercial and residential properties—hence, the name split roll—it actually breaks the roll into pieces.
Call it splinter roll.
Specifically, the new initiative creates all kinds of exemptions and new rules so that the property tax rules for different commercial properties, depending on factors like the value of the property ($3 million is a big number in the initiative) or the percentage of a property is occupied by small businesses. The set-up will create all kinds of new arguments for the courts and new dodges for businesses trying to keep their property taxes low.
And by the way, all of this complexity would be put into California’s already ludicrously long and complicated constitution.
The reason for the all the complexity is defensive politics.
The original, simpler split roll initiative was polling poorly, for a host of reasons, some of which I’ve written about previously. So this complexity is introduced as defense. We’re not going to raise the property taxes on small businesses or small property owners! Only the big, rich guys!
That bit of Elizabeth Warren demagoguery is better politics, but it’s horrible policy.
The new split roll contributes to the disease that it’s supposed to fight.
The argument for split roll is that Prop 13 is unfair—and Prop 13 really is unfair. Prop 13 distorts property taxes. It keeps taxes super low for older homeowners and longtime commercial property owners who have been in a place for a long time, because taxes aren’t based on the fair market value of a property today. Newer homeowners and business people pay much higher taxes on similar properties just because they bought at higher, more recent prices.
The original split roll proposed to end that problem for commercial properties, which would have had some value. The new split roll just creates more perverse outcomes and winners and losers based on size of business, and how good your lawyers and accountants will get at maneuvering the new rules.
The new split roll also preserves the worst part of the original initiative: its ballot box budgeting. Instead of putting additional property tax money into the general fund, it reserves the money for a special fund for community colleges and K-12 education. Those things need much more money, for certain, but this initiative wouldn’t provide that much.
And community colleges and K-12 already have constitutional protections in the budget. Higher education and programs for the poor lack such protections, and need the money more. And as a democratic matter, it would be better for the money to go into the general fund where it can be divvied up by our elected representatives.
The new split roll is also too clever by half, politically. The goal of the initiative has become to get a win—a win over Prop 13. But such a victory would be costly to the righteous cause of taking apart Prop 13. This initiative wouldn’t change much about Prop 13, and thus wouldn’t give the state the improvements – in tax receipts and democratic governance – that a wholesale rollback of Prop 13 would do. But when such a rollback is proposed in the future, voters may already say: we already fixed Prop 13 and it didn’t do much for us.
This was the same mistake made by the new split roll initiative’s sponsors when they backed Prop 30 in 2012. That was called the “Save Our Schools” initiative—but it didn’t save the schools. Instead, schools are still underfunded, with new revenues swallowed up by rising benefits and compensation costs.
When it comes to Prop 13, the better approach is to attack the initiative directly—and lose a couple times, until Californians get a better understanding of the problem it creates. Don’t split the roll—make property taxes simpler and fairer by basing them on today’s market value. Yes, grandma might sell her house—and that would be a good thing. (Grandma shouldn’t be holding onto a big empty house during a housing shortage).
And voters might finally see the anti-democratic folly of requiring 2/3 votes for tax increases in the legislature and at the local level.
But the crackpot “realists” of the California Teachers Association, the education lobby and the Democratic Party are firmly in control here. And they keep giving us pointless half- measures that won’t succeed even if they pass.