Proposition 15 and the Tug-of-War over Gov. Newsom

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

You’d have to forgive Gov. Gavin Newsom if he’s feeling like the rope in a classic tug-of-war between those on the opposite sides of the Proposition 15 property tax increase measure, each grabbing an arm and pulling him in their direction for an endorsement. 

Yesterday, numerous small business owners and representatives of small business organizations held a press conference urging Newsom to oppose the $12 billion commercial property tax proposal, pointing out the false premise that only big corporations will pay the bulk of the tax. 

“There is a misnomer that this will have zero impact on small business and that is not true,” said Rachel Michelin, President, California Retailers Association, referring to Proposition 15. “It will have a drastic impact, particularly on small and independent retailers who frankly are the cornerstone of local communities.” 

Many speakers argued that the property tax increase, passed on to small business owners through the leases they have on their shops, will hit hard women and minority owned businesses. Julian Canete, President & CEO of the California Hispanic Chambers of Commerce, said, “We must remember 48% of workers are employed by small businesses. Let’s be clear the tab will ultimately be paid by small businesses and consumers. We will pay more for everything we buy and use.” 

Previously, the California Teachers Association led public employee unions in pressuring the governor to endorse the $12 billion property tax increase, claiming the money is needed to offset the revenues lost during the pandemic. 

However, the business associations say business closures and job losses will be even greater if the heavy property tax is levied on businesses.  Cedrick White, owner of White’s Concrete Construction in Lancaster and President & CEO of the Antelope Valley Black Chamber of Commerce, said 20-30 percent of the Chambers’ member businesses have closed because of COVID-19 and many others have furloughed staffs. Saying that most of his member organizations rent their properties, “If Proposition 15 passes that’s going to put the majority of the rest of our members out of business.” 

The Retailers Association’s Rachel Michelin noted that sales taxes local governments rely on will disappear if retail shops have to close down because of the new property tax increase. 

Neither of Newsom’s two immediate predecessors wanted to jump into the thicket of dismantling California’s iconic property tax reform, Proposition 13, which Proposition 15 is designed to do. 

Arnold Schwarzenegger, when he was running for governor, referring to his friend and advisor, Warren Buffet who suggested changing Proposition 13 with which Schwarzenegger disagreed, “I told Warren if he mentioned Prop 13, he would have to do 500 sit-ups.” Gov. Jerry Brown said at a presentation to the Urban Land Institute in San Francisco in October 2015, “I’m not supporting a split roll. … We have problems with the business climate in California, and you’re going to add more burden.”  

Those business climate and business and job survival concerns have multiplied because of the pandemic. Now Governor Newsom is on the spot getting pulled in two directions in the middle of a catastrophic economic meltdown that no one wants to see get worse.

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