Prop 15, the one you get to vote on, is all about Prop 13 (1978), a proposition many people today wish they could have voted on in 1978.
Prop 13 is a proposition and an issue in California politics that will probably never stop being debated until it is repealed, which is why Prop 15 is a BFD, because it repeals a little bit of it. 1978 was a long time ago. In 1978, Jimmy "I'm still alive!" Carter was President, That 70's Show just finished production, and the iPhone wasn't even out yet.
Before 1978, properties were taxed at ~2.7% of the value of that property, on average; that value was equal to the market value (i.e. the price the property would sell at). 1978 happens – Prop 13 is voted in and sets the property tax rate at 1% max for all Californians. It also says that for any property bought thereafter, the value is the purchase price, with a small adjustment for inflation each year. For most property owners who have since bought property, the property tax rate is about ~1.1%.
Overly simplified, but more succinctly:
# Before Prop 13Property taxes paid each year = 2.7% * market value# After Prop 13Property taxes paid each year = 1.1% * purchase priceHere's an example of why Prop 13 can feel unfair. Two neighboring shacks in SF can both be worth $1M each in 2020, but if one was bought in 1980 for $100K, and the other was bought this year at $1M, the owners would be paying vastly different property taxes. The homeowners who bought in 1980 would pay around $2,430/year in taxes (because of the 2% annual value increase); the newer homeowners: $11,000/year. The LAO found this kind of disparity actually to be happening (to non-shacks too).
As soon as Prop 13 passed, local governments – state, county, and city – experienced a large dip in property tax revenue, often the main revenue source for localities. (40% of property taxes goes to fund public education, the rest goes to localities.) Cities and counties have had to make up for the decreased property tax revenue by raising taxes in other areas such as sales, hotels, and utilities. Prop 13 had other consequences, including reducing turnover in the market and reducing homeownership among young folks. All around, Prop 13 has been blamed for lots of California's financial woes.
Prop 15 would revamp Prop 13 for commercial and industrial properties worth $3M or more. It will not affect any residential or agricultural. Prop 15 would change how often these commercial properties are re-assessed to every 3 years, instead of only when it legally changes owners. Additionally, Prop 15 would give a tax break for taxable business equipment up to $500K.
Overly simplified, if Prop 15 passes, for commercial and industrial:
Property taxes paid each year = 1% * market valueThose opposed to Prop 15 say that this is terrible timing for increasing taxes on businesses that own property. Some landlords have made it so that businesses renting from them pay a portion of their property taxes. Opponents also argue that if the whole goal is to increase tax revenue, we should reform other things.
Supporters counter that this would take effect in July 2022, and the legislature has the ability to push it back if we're still in a recession. They say Prop 15 is not perfect, but it is a significant first step in reforming Prop 13 and alleviating some of the financial deficit it caused. They point to the ability for businesses to skirt property value reassessments. Michael Dell did it to save $1M a year in property taxes, after all.
Prop 13 is really bad for the state, but I'm thankful I have low property taxes.
Word
It is pretty unfair that some companies have been able to avoid property reassessments through restructuring loopholes.
Sure that loophole exists, but the LAO found that in LA, commercial properties are reassessed more often than residential on average
But isn't it unfair to homeowners that that loophole exists for businesses?
Is that the main problem with Prop 13?
It's not the main problem, but it's *a* problem with Prop 13, and Prop 15 is more palatable to voters than resetting everyone's home property taxes. It's a step in the right direction.
Why do you want more taxes? California already has the highest taxes in other ways.
That's how most other states work, and it's resulted in so much lost tax revenue. Localities have had to make up for it by taxing other things, hence the high taxes for other things.
We should be reforming other things if tax revenue is all you care about.
The state mismanages pensions for example. Or we should close other corporate loopholes. Or we should simply spend less.
Tax revenue translates to our schools, parks, police. so I care about it a lot because I live with it, and wait, I thought we both agreed Prop 13 was really bad for the state.
It's bad for a state that spends so much, but keep in mind what it was like before Prop 13 – avg property tax was 2.7% with home values increasing. There's a reason prop 13 passed with 65% of the vote.
Irrelevant rn. Prop 15 doesn't touch residential, nor agriculture, and the ceiling will still be 1% of the assessed value. It's just the timing of when we assess commercial properties.
Yes, of course California wants to raise taxes on commercial properties during a pandemic
It only affects commercial properties worth $3M or more, and only those that haven't been reassessed recently. That's the point. And business equipment would get a tax write-off for the first $500K to help offset the new tax.
It also doesn't take effect until 2022, and if shit is still bad then, the legislature has the option to continue to push it back.
You say "only" as if it isn't huge. This is ~$12B huge. Some businesses will close, people will lose their jobs, and many businesses will have to raise prices for consumers.
Californians are already much taxed, so poor.
They've gotten a huge tax break for so long. Some jobs will be created to reassess everything, and think about it. Start-ups and small businesses just now buying property will have a level playing field with their competitors.
If we agree the Prop 13 needs to be reformed, then this is a significant first step. Profits might decrease as businesses get their footing but we'd all benefit if we're more equally sharing the tax burden, especially now that local governments will have deficits.
I don't know if we agree Prop 13 reform is the best option right now, or if other, less painful, changes can be made instead.