Measure to split property tax roll qualifies for 2020 ballot
(Calif.) The League of Women Voters of California along with PICO California cleared a milestone earlier this month in qualifying a measure for the 2020 ballot to split away property taxes for homeowners from those paid by big commercial holdings.
The proposal, dubbed the California Schools and Local Communities Funding Act, could raise as much as $11 billion annually in new revenue by requiring most commercial and industrial property taxes be on fair-market value.
Currently, businesses and homeowners both pay property taxes base on the land’s value when it was purchased.
Supporters collected more than 850,000 signatures to qualify the measure, Secretary of State Alex Padilla announced last week.
The current system was established by Proposition 13, the landmark 1978 tax property measure and the long-recognized “third rail” of California politics.
Critics say the current system allows big commercial landowners to buy and sell expensive real estate without triggering higher appraisals and thus, higher taxes.
They argue the only solution is to adopt a split roll, where homeowners would continue to enjoy the protections under Proposition 13 but businesses would lose the existing loophole.
This is not the first time an effort has been mounted to adopt the split roll. But in the past, however, opponents have been able to muster anti-tax sentiments that run deep among a large number of voters and defeat the effort often before it got on the ballot.
As recently as 2014, a poll by the Public Policy of California found 59 percent of voters favored taxing residential and commercial properties differently. But even with those numbers, supporters were reluctant to bring the issue forward fearing the response from the tax and business lobby.
One development might give proponents a better chance—passage last year of the federal tax codes by Congress. Because the nation’s new tax law both benefits corporate interests and inflicts penalties on homeowners in high-cost, high-tax states like California, some pundits believe voters might be ready to make the change.
As proposed, K-12 schools and community colleges would receive about 40 percent of the windfall with the remaining 60 percent going to local government agencies.
At issue is the requirement that property can only be reassessed for property tax purposes after ownership has changed.
Thus, if a homeowner bought a house in 2000 and continued to live it until today, the owner would continue also to be paying taxes based on its value from 18 years ago.
But when it comes to major commercial real estate holdings, such as an office tower or business park, it is common for the title to change hands without a technical change in ownership.
Instead of selling the building, which would trigger a reassessment, new partners are allowed to buy into the corporate structure instead and replace the former partners without paying higher property taxes.
The California Schools and Local Communities Funding Act would close that so-called loophole by assessing commercial properties at their actual value. Under the proposal, homeowners would continue to receive the existing protections of Proposition 13 that restrict taxes to 1 percent of the purchase price of the land and no more than 2 percent a year, supporters said.