California businesses operate under some of the strictest clean air standards in the world, and these regulated businesses have largely continued their operations here thanks to Proposition 13 – the reform measure that provides certainty and affordability in property taxes.
Unfortunately, environmentalists recently announced support for a November ballot measure that would repeal property tax protections and encourage businesses to set up factories and facilities in parts of the country that are less regulated than California, quickening the pace of climate change.
“The original Proposition 13 has been a bad deal for California,” Sierra Club California Director Kathryn Phillips said in a written statement announcing the group’s support for the $12 billion-a-year property tax increase.
The initiative would start by repealing Proposition 13 protections for commercial and industrial properties, forcing them to be reassessed to market value every few years. As the statement indicates, the Sierra Club views this as the first step in the total repeal of Proposition 13 for all property owners, including homeowners.
Under Proposition 13, taxes are based on the value when the property is purchased, plus an annual inflation factor (limited to 2 percent per year) and reassessments for any new construction that adds value. This gives the owner certainty, makes the tax increases manageable, and ensures a steadily increasing flow of revenue for public schools and local government – all while keeping the cost of living from being even higher in this state.
Ignoring these benefits for Californians, Phillips claimed that Proposition 13 “established an endless tug-of-war for resources to fund vital services,” and that “in this tug-of-war, necessary protections for the environment have gone without support.”
This simply isn’t the case. Property tax revenue has increased tremendously over the years, even as individual property owners are protected from unmanageable increases. A new property tax report from Santa Clara County illustrates the growth: The value of taxable property has grown from $261.9 billion to $551.5 billion just since 2006, providing local schools and government with approximately $2.9 billion in additional property tax revenue this year alone.
State revenue also has grown significantly, going from $94.5 billion to $146.5 billion from 2006-07 to 2019-20.
Environmental programs have grown a lot since the 1970s, too. The budget for the California Natural Resources Agency grew from $317 million in 1976-77 to $3.6 billion in 2019-20, the California Environmental Protection Agency was created in 1991 (and now has an annual budget of $193 million), the cap-and-trade program was created in 2006, and voters approved $32.9 billion in water and environmental bonds since 1986.
Of course, government spending isn’t the only metric. Thankfully, there have been major behavioral changes and private-sector technological breakthroughs in California in the past 40 years that increase public attention to the environment. This puts less onus on government to spend tax dollars to remind people of their responsibility to protect their surroundings.
In its statement, the Sierra Club falsely claimed that the split-roll initiative would not impact agriculture or small businesses. In fact, the initiative would require frequent reassessment of agricultural buildings like barns and dairies – and even trees and vines, which are taxed as property – and its tax increases would be paid by many small businesses under leases that make them responsible for paying for tax increases.
Split-roll supporters also claim their measure would close a “loophole,” which ignores that Californians overwhelmingly rejected split-roll measures in 1978 and 1992, and very intentionally maintained a system that treats properties equally. The split-roll measure proposes that for the first time in California history, a different assessment system would be used for some properties.
As a member of the steering committee of the campaign opposing the split-roll measure, I have talked to many business owners who say this tax increase would force them to shut down or move jobs and investments to other states. This would be a loss for the environment, considering that other states are much less stringent about stopping pollution.
Additionally, the split-roll measure would encourage local governments to pave over conservation land and open space, rezoning it for higher-taxed commercial property like offices, warehouses and strip malls.
For businesses that manage to stay open in California, the tax increase would be passed along to consumers. Economic studies show this would lead to higher costs for all of us, including higher food prices thanks to the tax increase on agriculture.
California passed the landmark Global Warming Solutions Act in 2006. If we are to continue to provide solutions to stop global warming, we must keep business here in California with laws that provide certainty and affordability, like Proposition 13.
Job losses, higher costs and no environmental benefit – all good reasons to vote no on Proposition 15, the $12 billion property tax hike on the November ballot.