Comstock's magazine 0919 - September 2019 | Page 17

LETTER FROM THE PUBLISHER n
A SPLIT-ROLL PROPERTY TAX
MEASURE IS BAD FOR BUSINESS
PHOTO: TERENCE DUFFY
W
hen we saw the first email system in 1978, nearly all of us
were still sending letters with a 13-cent stamp. Gasoline
was cheap at about 65 cents a gallon. In California, most
people could buy a home for less than $50,000.
At that price, most of us could afford to buy a home. But in
1978, many middle-income families, including those who had
bought their homes at much lower prices many years before,
were fearful of losing the biggest investment of their lives. Al-
though they could afford the original mortgage, escalating
property taxes fueled by the worst inflation since the 1940s
threatened to push them out of their homes.
That was the volatile environment in which California tax-
payers overwhelmingly passed Proposition 13. In a year when
the U.S. Bureau of Labor Statistics recorded inflation at nearly 9
percent, it capped the tax base at 1 percent of a property’s value
and annual tax increases at no more than 2 percent. Perhaps it’s
a coincidence, but that is the rate of inflation the Fed considers a
barometer of a healthy economy today.
Prop. 13 reassesses the tax on the value of a home or com-
mercial property when it changes ownership. Nearly two-thirds
of California voters approved a measure that cut property tax
rates by nearly 60 percent.
Beyond the tax cut, Prop. 13 was also a demand from home-
owners and businesses for economic stability and predictability,
two key factors to long-term planning.
Next year, voters will be asked to amend Prop. 13 through a
ballot measure that will upset more than 40 years of that steadi-
ness and a “no surprises” business environment. The measure
calls for a “split roll,” in which commercial and industrial prop-
erties would be taxed separately and more often than homes.
Reassessing those properties on their current value every three
years would impose the same unfairness on businesses and in-
dustrial companies that homeowners escaped four decades ago.
The backers of the initiative claim it’s unfair that business
properties seldom face tax increases because ownership doesn’t
turn over as often as a home. But that is a simplistic argument in
an attempt to sell an initiative that is too costly and too complex
to work.
The initiative’s backers and the nonpartisan California
Legislative Analyst’s Office estimate the split-roll measure will
generate between $7 billion and $11 billion annually, primarily
to support city and county government and special districts as
well as schools. But schools already claim a large portion of ev-
ery property tax dollar through Proposition 98.
And it’s a tax hit businesses can’t afford, especially in an
economy with flat consumer spending and trade tariffs. The
Federal Reserve recently noted that U.S. manufacturing has
slumped in the first half of this year. That’s a sign of a fragile
economy. The timing for a tax increase couldn’t be worse.
That tax also would hurt small businesses. Technically, they
are exempt from the proposed measure. But the majority of
small businesses lease storefronts, offices and other properties
valued easily at more than the $3 million threshold this mea-
sure puts in place, and the additional taxes would be passed
onto them in the form of increased rents, an unintended — but
very real — consequence.
The proposed measure would have “a devastating im-
pact” on counties and would overwhelm their ability to assess
nearly 650,000 commercial and industrial properties statewide,
according to a nonpartisan and independent analysis by Capitol
Matrix commissioned by the California Assessors’ Association.
The statewide cost to complete the assessment roll, according
to the analysis, would increase between $380 million and $470
million annually during the first five to 10 years. And those pro-
jected increases do not include the cost to upgrade technology
systems. Counties would need to hire seven times more apprais-
ers than they now have and would need three to five years to
train them properly. Sacramento County, for example, would
need to add 48 commercial appraisers to their staff of 34 to han-
dle an extra 12,000 appraisals a year.
Prop. 13 has worked for four decades because it is simple to
administer and provides one measure of stability in a challeng-
ing economy. By comparison, the proposed split-roll measure is
complex, costly and nearly impossible to administer in the near
term.
Prop. 13 is working. Splitting it in half is bad for business
and a bad deal for counties.
Winnie Comstock-Carlson
President and publisher
September 2019 | comstocksmag.com
17