As we approach the 33rd anniversary of the
voters’ approval of Proposition 13, efforts to undo the initiative’s property
tax protections are getting more attention.

The biggest threat is AB 448, by Assemblyman Tom Ammiano,
who announced last year that he would like to "nuke" Proposition 13 in its
entirety. His legislation would take a big step toward this goal by repealing
Proposition 13 protections for employers, even as the state struggles with a 12
percent unemployment rate.

Under Proposition 13, property is assessed based on the
acquisition value, and this value cannot increase more than 2 percent in any
given year, unless there is new construction or a change in ownership. When
property changes ownership, it is reassessed based on the purchase price.

AB 448 would trigger frequent reassessments of property
owned by legal entities (incorporated businesses, partnerships, trusts, etc.)
by requiring a "change in ownership" reassessment even when there is no actual
change in ownership. For example, it would require reassessment of property at current
market value based on changes in a publicly traded company’s stock, even when
no change of control takes place.

The measure goes out of its way to try to raise taxes on
employers. While it states that it would apply "when 100 percent of the ownership
interests in a legal entity … are sold or transferred in a single transaction,"
it defines a "single transaction" as not just a single transaction! Indeed, a
"single transaction" would include cumulative transactions in a three-year
period, and sales of a single share of stock, transferred many times, could
trigger a property reassessment.

Most importantly, a split roll would devastate California’s already
ailing economy, and would put more people in the unemployment line. With more
than 2.1 million people looking for jobs, this is the last thing we need.

By drastically increasing property taxes on business owners,
a split roll would lead to higher product prices, reduction in employee
salaries, and a reduction in overall economic activity. The property tax
increases would hit small businesses hard, because they typically are less
likely to be able to absorb large, unforeseen increases in costs. Even business
owners who lease space would be impacted, as rental costs would increase along with
the property taxes.

A split roll would do all of this significant damage to the
economy, but wouldn’t help solve the current budget crisis, because it would
not yield a penny in revenue this fiscal year. A reassessment could occur only
on the next lien date (January 1) – assuming that the county assessors would be
able to quickly hire a large number of new workers to get all of their work
done by then – and the property taxes would not be due until December 2012,
long after the 2011-12 fiscal year has ended.

As recent state tax collections have shown, economic growth
is the best source of new revenue. Anything that jeopardizes growth is a recipe
for fiscal problems. The Legislature should focus on fostering more growth and
more jobs, and should reject AB 448 as a step in precisely the wrong direction.

Rodriquez is vice president of state tax policy for the California Taxpayers
Association, a non-partisan, non-profit organization formed in 1926 to support
good tax policy, oppose unnecessary taxes and promote government efficiency.
CalTax is online at