Former State Board of Equalization chairman Conway Collis’s article arguing for higher taxes on commercial property in the San Jose Mercury News last week didn’t tell the full story. He did not cover the negative consequences of such a move.

Collis was trying to sell splitting the property tax roll between business and residential property as the panacea to dig California out of its deficit problem. He claimed increasing taxes on business property would raise $6 to $ 8 billion in new revenue for government.

In reality, raising business property taxes will prolong our fiscal mess because it will act as a disincentive to job creation and business growth, which is the only way to pull California out of the deficit hole. If billions were raised in taxes they would not be available for job creation. In fact, former Legislative Analyst Bill Hamm noted in a study last year that for every one percent increase in business property taxes, 43,000 jobs would be lost.

But there are other consequences that Collis ignores as well. Commercial property is suffering in the market just like other property. Shops are closed and buildings are empty. Raising taxes on some owners that cannot pay means that the anticipated revenue will not be there.

Collis argues that the current system discourages business development. He claims new businesses don’t want to locate in California because they will pay more in property taxes than their business competitors.

California’s current property tax system has been in place for over thirty years and plenty of businesses have chosen to locate here during that time. Only in the last decade have businesses turned their back on California because of an overall tax and regulatory system that punishes business. Only recently has California fallen to 49th and 50th on surveys of tax and business friendly surveys of the states. The businesses that are fleeing the state are often long established and have the full benefit of the Proposition 13 tax system. It is the overall tax and regulatory burdens imposed by California government that is chasing them away.

Businesses prefer the certainty of the current property tax system to the subjective yearly tax change they would have to endure under Collis’s split roll proposal of yearly re-assessments.

Collis acknowledges that costs for consumers could rise if property taxes are passed through, but tries to argue that those costs will generally be “borne by high-income landowners.”

That argument simply ignores the reality of most California business. The biggest victims of a business property tax increase will be the least vulnerable businesses. Small business, a great many minority and women owned, will face this new tax burden. Many small businesses often sign leases that require them to pick up any property tax increase.

Collis’s off-the-cuff charge that residential property pays three-quarters of the property tax is not backed up by any research that I have seen. In fact, the California Taxpayers Association has pointed out in a study prepared at the time of Prop 13’s 30th anniversary that non-residential property as a whole pays a higher percentage of full market value than residential property amounting to non-residential property paying over a half-billion more in property taxes than residential property.

Collis’s argument is built on revisionist history. He writes that Proposition 13 was intended to protect homeowners. In 1978, voters had the option to adopt a split roll while getting homeowner property tax relief by passing Proposition 8 put on the ballot by the legislature to counter Proposition 13. Prop 13 would apply property taxes on the same basis to both business and residential properties as the law had done for decades. The voters passed Proposition 13 and rejected Proposition 8.

The voters understood then as they understand now that keeping a healthy business climate leads to a more prosperous state.