We were a bit taken aback by the recent article in the Journal by reporter Teri Sforza rhetorically asking if big businesses in Orange County are paying enough property taxes. It wasn’t until the end of the article that it was acknowledged that in 2020 California voters rejected the “split roll” proposal by voting against Proposition 15. This measure would not only have imposed the most property tax hike in California history, but it was also the most serious threat to Proposition 13 since the taxpayer protection measure was overwhelmingly approved by voters in 1978.
The same people who always wanted to destroy Proposition 13 so they could raise taxes even more are now claiming Proposition 13 needs to go because it caused “injustice.” In fact, Proposition 13 works exactly as intended to achieve a lasting balance between fiscal stability and revenue growth. That is why, for more than 40 years, Prop. 13 enjoyed such consistent popularity that it earned him the nickname “The Third Rail of California Politics.” Even after the costly and long-running campaign against it, a poll finds that 60% of Californians think Proposition 13 is “mostly a good thing.”
More importantly, Proposition 13 is also good tax policy. First, it limits the property tax rate to 1% of the value of a property. Second, it limits the annual increase in assessed value to 2% per year. Under prop. 13, even if a property doubles its market value in a single year, its “assessed value”, to which the appraiser applies the 1% tax rate, can only be increased by 2% per year. Third, Proposition 13 requires a revaluation of ownership when it changes hands. This provides a stable and predictable source of tax revenue to local governments that has grown virtually every year since 1978 in percentages that outpace inflation and population growth.
Critics often try to argue that voters didn’t know Proposition 13 would apply to commercial property the same way it protects residential property. This too is false. During the campaign Prop. 13 in 1978, opponents emphasized this argument in their ads and campaign materials, and it was specifically mentioned in the official ballot itself. Voters considered the request and still passed Prop. 13.
Sforza quotes longtime Prop critic Lenny Goldberg. 13 and split-roll advocate, who says commercial property in Orange County is undervalued. Goldberg knows best because he is fully aware that by virtue of prop. 13, the taxable value depends on the market value at the time of acquisition. (Despite his continued jihad against Proposition 13, Goldberg now resides out of state, avoiding California’s high tax burden).
Goldberg is particularly dishonest when he argues that two large Orange County businesses are undervalued because commercial properties are only revalued when a single buyer takes at least 50% or there are physical improvements to the property. “So if three buyers buy 100% of a property, no change in ownership occurs.”
The definition of “change of ownership” is not found in Proposition 13, but in laws passed by the legislature. The 50% ownership threshold for reassessment could be corrected by a change in the law without changing a single word of Proposition 13. In fact, the Howard Jarvis Taxpayers Association and the business community have repeatedly proposed to correct this definition of “change of ownership” only to see the trade unions, represented by Goldberg, slam the door. These legislative proposals have been proposed by politicians as diverse as former Assemblyman Tom Ammiano, an ultra-progressive from San Francisco, and Orange County’s own Patricia Bates.
California taxes are among the highest in every category except property taxes, and even then we are in the upper average of the states in property tax collection per capita. Only one thing protects us from the misery of being at the top of the list: proposition 13.
And it’s doubtful that voters are in the mood to change Proposition 13 in any way, leading to higher taxes, whether on homes or businesses.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
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