The United Chambers of Commerce opposed the Split-Roll initiative when it was presented at the Government Affairs meeting last spring. Now that it is a formal ballot issue as Proposition 15, our opposition is still intact. Why?
Proponents of Proposition 15, the property tax increase on businesses, say this new tax money could be used to address poverty, unemployment and homelessness. However, if this new tax passes it will add to the historic bankruptcy filings, unemployment, poverty and homelessness we are now experiencing, and it will raise the cost of living for everyone as the increased business costs are added to everything we buy.
The proponents of Proposition 15 claim that the measure is a fair and balanced reform that will close loopholes in the 1978 Proposition 13 law. What loopholes? Proposition 13 stated that all property in California will be taxed the same, locking in the rate at that time and allowing for a maximum 2% annual increase.
The proponents of Prop 15 say California is giving away billions of dollars in property tax breaks to wealthy corporations. What they are saying is that despite businesses living under the law of California, revenue generated by businesses actually belongs to the state of California.
It is shameful that the State’s Official Voter Guide begins the description of the measure by saying it increases funding sources for public schools and local government services but ignores the consequences on business, jobs and the economy.
We all know how often increased taxes do not go where we were told they are going. It was stated by the California Assessors’ Association that it would cost more than $1 billion just to implement the complex laws created by Prop 15 and take years to accomplish. That fact is ignored by the ballot booklet and the proponents of the measure.
Proposition 15 will tax commercial property at the rate that County Assessors claim the property is worth on the open market. It is a subjective guess and puts business on the spot to challenge the assessor’s estimate. Can assessors even provide a good assessment of the businesses they have to assess?
As Jeffery Prang, L.A. County Assessor pointed out when he spoke to our Government Affairs Committee last year, his department will have to hire and train hundreds of new assessors to be able to reassess the properties and take 5 years to fully implement. Proponents claim this new tax rate will only affect large corporations because commercial property worth $3 million or less will be exempt. Based on property values in California, with the average residential house now over $530,000, what size commercial or industrial building would it take to be at the $3 million threshold? Most retailers and many manufactures are leasing their facilities. How will these businesses survive when the landlord raises their rent in accordance to the triple net lease, passing on the new property tax portion?
Using residential as an example, if the owners are still living in their house that they bought for $50,000, pre-1978, and it is now worth over $1 million, there property tax could go from around $1,000 a year to $10,000 per year. A jump of 1000% could very well be lethal to the business and the landlord, not to mention what that would do to a homeowner. Why use residential property as examples? Because some supporters of Proposition 15 admit that they would like to remove the protections that Proposition 13 has provided to homeowners for the last 42 years. Everyone’s home will be at risk of increased taxes.
Proposition 15 is just a money grab to help cover the governments’ long-time mismanagement of our tax dollars at a time that many California businesses are in jeopardy of closing. That’s why the United Chambers of Commerce urge a No vote on Prop 15.