Proposition 15

California Proposition 15, the Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative would not change the amount of property tax paid for personal homes. So what does it do?

It creates a split roll for property taxes in the state.  Commercial and industrial properties (except commercial agricultural properties) would no longer be taxed based on purchase price.  Instead they will be taxed based on their market value.

Back in 1978 when Proposition 13 was passed by the voters, all properties were then taxed based on their original purchase price.  Adjustments for inflation were limited to 2% annually.  This created massive disparities in how properties are taxed.  

To illustrate, consider two homes in Santa Monica within 1 block of one another.  One is estimated to be worth $5.7 million, the other is listed for sale at $4.8 million.  The annual property tax bill for the former is under $3,000.  The annual property tax bill for the latter is around $36,000.  Why the difference?  Because one was purchased before 1976.

The same rules apply to the property tax bills for commercial and industrial properties.  I am old enough to remember the campaign for and against Prop 13.  A combination of sky-high inflation and a strong increase in demand for housing in California had caused a meteoric rise in the value of said housing.  As a result, retired homeowners were in danger of losing their homes to the soaring property tax increases.  Some also place the "blame" for the so-called tax revolt on the fact the Legislature spent our tax money like drunken sailors.  Ironically, three of the largest businesses in the state, Bank of America, Southern California Edison and Carter Hawley Hale (parent of what was known as the Broadway Department Store chain) all came out against Prop 13.  A footnote here, while many like to claim that Prop 13's margin of victory was 2 to 1 (or even more than 2 to 1), the actual tally was 62.6% to 34% in favor.

The CA Legislative Analyst's Office (LAO) points out in its analysis of the fiscal impact of Prop 15 that it only applies to commercial and industrial properties valued at more than $3 million.  This also applies to properties worth less that are part of a real estate portfolio worth more than that amount.  They also estimate that Prop 15 will generate between $6.5 billion and $11.5 billion in new funding for local governments and schools.

Almost every prominent Democrat politician in CA supports Prop 15.  That includes Governor Newsom, Senator Harris and L.A. Mayor Garcetti.

Funding for the campaign in favor of Prop 15 comes from the California Teachers Association, the Service Employees International Union, and Chan Zuckerberg Initiative Advocacy.

There are very few CA politicians taking a position against Prop 15.  The campaign against Prop 15 is getting its major funding from the California Business Roundtable, the California Business Properties Association and the California Taxpayers Association.

I will vote yes on Prop 15.