Written by Michael Palomba
A new initiative to repeal Prop 13 protections for businesses is gaining interest among progressive groups. This is dangerous because Prop 13 accomplishes many things:
- It required that all categories of real property on the local assessment roll be assessed at the same basic tax rate and under the same valuation standard. It did not distinguish among residential, commercial, industrial, agricultural, or any other type of property.
- It capped local property tax rates at 1% of the property’s assessed value—based on the market value as of the date of the most recent change in ownership or new construction.
- It capped property tax increases at 2% per year. This means that property taxes are pegged to the property’s original purchase price, plus improvements, not what the property is currently worth.
- When a property is sold, it is reassessed at its new purchase price. It is then taxed at a rate of 1% of that new value, and from then on, Prop 13’s tax limits apply until it is sold again.
- These protections provide stability and predictability to both property owners and government coffers — protecting both from very high or very low reassessed property values each year.
The new “split roll” tax initiative needs more than 1,000,000 signatures to qualify for the ballot. And it appears that Democrats and their special interest groups will stop at nothing to convince people, even if they have to deceive voters in the process.
Theses “split roll” taxes would be the largest tax increase in the history of California, estimated to impose billions in new taxes. However, that is not what you will be told when you are asked to sign. Signature gatherers have been telling people that the new tax increases actually protect Prop 13. As we know, however, that is completely false.
Split roll taxes would harm not only businesses, but the customers of those businesses as well. See, these new taxes would force businesses to have higher property taxes imposed on them. This would apply to all businesses from Walmart to your favorite store in Westfield Mission Valley, and even the mom and pop shop down the street. Businesses like these would see operating costs skyrocket, which would result in higher prices, unemployment, and some businesses shutting down completely.
Now, you may be thinking, “I don’t own a business, so why should I care?”
Well, I would guess that while you may not own a business, you probably frequent quite a few. And that’s where these new taxes would affect you. The business has to make up for this loss of income somehow, and there are two major ways that would take place.
The first would obviously be price increases. As taxes increase, prices have to go up to compensate. So, whether it’s your morning cup o’ joe from Better Buzz or a new jacket you wanted to buy from Forever 21, these split roll taxes will cost you more money.
Labor costs would be another area business owners would look to cut costs. San Diego’s minimum wage is currently around 40% higher than the federal minimum wage. And with a push from Democrats to push that wage even higher to $15 per hour, you can bet that business will not hesitate to cut staff to make up for their increased property tax. This puts many low-skill workers at risk of losing their jobs.
Prop 13 was put in place to stop the state from “tax gouging,” if you will. Even back in 1978 when nearly two-thirds of voters voted in favor of Prop 13, they knew that the protections were needed to protect individuals and businesses from being overtaxed. Stripping businesses of those protections is the first step towards the complete eradication of Prop 13 as a whole.
Just like you, businesses do not want to get taxed into bankruptcy, and Prop 13 is the only thing preventing that from happening.
