property taxes

Unions Aiming to Repeal California's Property Tax Caps

Californians' tax rates are among the nation's highest in almost every category, but their property tax levels have remained reasonable. That could change soon.

|

For a sense of the endless political resources that California's left-leaning groups have at their ready, consider this recent turn of events. After having spent $3.45 million last year to qualify a tax-hike measure on the 2020 general-election ballot, activists have decided to start from scratch on a "new and improved" version. Given the higher vote totals that they now need, they'll have to spend at least $5 million on the new signature drive.

This would be chump change for labor groups such as the California Teachers' Association and the Service Employees International Union—and other prominent backersof an initiative that will obliterate Proposition 13's tax protections on commercial property owners and small businesses. Consider $5 million a small investment given the likely payout if voters are foolish enough to embrace this record-setting property tax boost.

According to the filing at the California Secretary of State's office, the currently qualified "split rolls" initiative will result in a "Net increase in annual property tax revenues of $6.5 billion to $10.5 billion in most years, depending on the strength of the real estate markets." The bulk of the money "would be allocated to schools (40 percent) and other local governments (60 percent)." There are no revisions that can alter the fundamental nature of this stinker.

A spokesman for the campaign told Politico that it refiled the initiative to create "improvements to implementation dates, expansive new small business tax relief, clarified education financing and stronger zoning language to ensure large corporations cannot avoid reassessment." He said changes will "substantially strengthen the measure" and "widen the path to victory." I would have loved to have seen the polling that led to this costly reboot.

The proposal is known as "split rolls," because it splits away commercial property tax protections from residential ones. Public-sector unions and Democratic officials have been gunning for Proposition 13 since its passage in 1978 amid a tax revolt. Californians were furious at rapidly rising tax bills. Elderly people were being taxed out of their homes.

The measure capped property tax rates at 1 percent of the sales price and limited increases to 2 percent a year (plus local bonds). Prop. 13 has been the third rail of California politics—you don't touch it, if you want to live—since then.

Californians' tax rates are among the nation's highest in almost every category, but their property tax levels have remained reasonable. Given high home values, the state still gets a hefty share of those dollars. According to a calculator from the Howard Jarvis Taxpayers Association, the annual property taxes on my modest home would increase $15,000 if Proposition 13 were eliminated. I'd be moving out of state.

Liberals have long blamed Prop. 13 for destroying public services, but that's malarkey. The state's total tax take has increased significantly, even on a per-capita basis, over that time. Our government employees are the best paid in the nation, and they receive pension deals that boggle the mind. State budgets have set spending records and schools received a 66-percent funding boost over six years. Services are crummy because of bureaucratic priorities—not funding shortages.

You can consider any new property taxes as pension taxes. The California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) are vastly underfunded even after years of record stock-market gains. If recession hits, they could get sucked into an inextricable hole. This is because for years cities and school districts have been passing unaffordable pension increases. Money is fungible, so new property tax dollars—however they are earmarked—will cover up this problem.

Such a large tax increase could be economically devastating. "Increased business taxes ultimately are passed on either to consumers as higher prices, to employees as less compensation, or the general community as less business activity," explains the California Chamber of Commerce. Higher property taxes will diminish commercial property values, which could spark another real-estate bust. That's one of my fears as the owner of an office building.

Progressive strategy has been to chip away at Prop. 13 protections by assuring one set of property owners that they're only coming after another set—to make "them" pay their fair share. First, they called for tightening up so-called loopholes during property transfers. Now, they want to eliminate protections from many commercial properties. Eventually, they'll be gunning for your home. No matter how much you give them, these activists will never stop until they've bled your bank account dry.

Fortunately, the initial 2020 tax-hike initiative was such a mess that its backers have to start again with a new measure that is supposed to be more appealing. But polling remains dismal for them because there really is no way to put lipstick on this pig. The only way to keep such activists from the trough is to refuse to vote to increase your own taxes.

This column was first published by the Orange County Register.

NEXT: Review: It Chapter Two

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Why should anyone outside of CA care?
    And why do you stay in CA?

    1. 1) Because what happens in California doesn’t stay in California. Consider it a preview of coming attractions. As they ratchet up the pressure of the shit, the marginal Californians leave the state and bring their tolerance for shit pressure with them – they’ll advocate for the same shit in their new states right up to the point just below their shit tolerance level.

      2) Greenhut has a very high shit tolerance level, one that would crush the average resident of a red state. Beware when his shit tolerance threshold is breached – he’s moving to Texas and he’s going to vote. “At least this isn’t as bad as California” is a pretty low bar for shit tolerance and you should be very afraid when these people start showing up in your neighborhood.

      1. You may be shocked to learn that very few states are controlled by unions like california is. Most states tell them to fuck off with their politics.

        The only downside here is assholes from california fleeing the draconian policies of california to merely refinement them wherever they fled to.

        1. It isn’t about shock. What Jerryskids says is absolutely true. It isn’t that ex-pat californians necessarily advocate for more taxes, and larger state governments. They just, as he says, tolerate it. And then special interests exploit those changing demographics.

          If you want examples, look no further than Colorado. George Soros poured billions into that state to turn it from red to blue. And in the past year, Dems have worked hard to dismantle its last bastion of relief (Tax Payer’s Bill of Rights), have ceded autonomy to the Popular Vote winner in elections (aka California, New York choices), passed several gun control initiatives- all while making the state Ground Zero for the SJW wars on small business.

          People on the left look to California as an example, not a warning. Their cognitive dissonance looks at California’s solutions to problems as good ideas despite fundamental issues (like Prop 13) not as the root cause of those problems to begin with. And they are coming to cities near you in Texas, Arizona, Florida, Virginia and Tennessee (among others).

          1. This is where one’s perspective comes in to play.

            Most of the USA looks to Commifornia as a warning. Some people look at it as an example.

            Cities don’t completely control their respective state but they play a big role in how the state is run. Denver area controls much of how Colorado is run. Taxifornia is run by many cities and large coastal area Lefties. Atlanta is loaded with Lefties but that city doesn’t run Georgia.

          2. You missed my second paragraph.

          3. Overt, you are correct about how the prog/lefties look at CA. Right as well about the “tolerance” of the expats we see moving in. After an earthquake, Katy bar the door!

            And no state without an income tax will be long abided,

        2. > You may be shocked to learn that very few states are controlled by unions like california is.

          And the crazy thing is, it’s only two unions. Both government unions. The teachers and the prison guards. It’s crazy. Labor unions exist, but they don’t hold any power because California is a right to work state. SEIU may make some noise, but outside of a hard left city they’re powerless. They certainly don’t direct the ebb and flow of tax dollars.

          But those two government unions. Hell, they say jump and everyone in the state asks how high. How the fuck did a prison union get such power? It’s nuts.

      2. While that is a possibility and has happened to some states like Colorado and Nevada, both of these states only had a short spell as Red states. Both states went for LBJ in 1964 and Bill Clinton in 1992.

        1. Additionally, Lefty voters to Red states get pissed because they dont have the impact on elections that they hoped.

          1. Leftists are basically locusts.

      3. The streets of SF, LA, etc. are literal sh*tholes too, so they will tolerate a lot of it.

  2. The question in my mind is what happens when CA runs out of money to pay for these gold-plated benefits? It seems to me that pensioners will be taking a pretty hefty ‘haircut’ on benefits when CA runs out of money.

    I do not think union members salaries and benefits are protected anything in the CA constitution.

    1. “I do not think union members salaries and benefits are protected anything in the CA constitution”

      California is literally the state that made up the idea that the constitution disallows benefits to ever be decreased once offered.

      1. Illinois actually has that in their constitution. Good luck getting anyone to overturn it.

        1. Precisely my point. Is that actually the case with CA as well?

        2. Mr. Market can overturn that provision.

    2. They’ll try to hit up the feds, i.e. make taxpayers in other states foot the bill, because reasons. All that big talk about being the world’s fifth largest economy will disappear like a fart in a cyclone.

      1. Sandwich….I always pay attention to these municipal bankruptcy and pension underfunding articles because here in the People’s Republic of NJ, we are about to face a fiscal crisis of epic proportions. In large part because one Goldman Sachs reject (Corzine) left his distant successor who of course is another Goldman Sachs reject (Murphy) with a gigantic pension fund mess.

        Sometime, a state is going to try and declare bankruptcy.

    3. You would be surprised that many ex-Californians on pensions moved out of state years ago. Its why Taxifornia went after them to prevent them from paying no state tax on their income because they moved to Nevada; Washington; Texas; Jackson Hole, Wyoming; and Florida.

      1. FYI People moving from high wage, high tax and high real estate states when they retire – pension or no pension – has been happening like forever.

  3. The only way to keep such activists from the trough is to refuse to vote to increase your own taxes.

    Once those activists make up a majority of the voters, it’s game over. California keeps driving out the productive taxpayers to speed up the process.

    1. In other words they think a piece of paper can protect them from running out of other people’s money.

    2. These activists are very good at what they do, including getting a majority to support their initiatives. The retooling of their Anti Prop 13 initiative is a perfect example. They target businesses to attract private home owners. They do this with gas taxes, income taxes on the top 1% then 5% then 10%, and taxes on sugar and cigarettes.

      Every initiative is carefully targeted to hit 10 – 30% of the voting public, so that they can garner support from the other 70-90% of the public.

      1. As the saying goes:
        “Don’t tax you. Don’t tax me. Tax the guy behind the tree.”

        But sometimes the voters realize they are one day going to be on the other side of the tree.

  4. My younger sister lives in the San Fran area. Big left winger. Makes 60,000 a year and needs two roommates to afford a fairly nice place to live . She just can’t figure it out.

    1. You can’t live in San Fransisco on 60k. You can live in anywhere east of I-5 on that salary though. But not in San Fransisco. Not without two roommates.

  5. No recurring tax on a personal dwelling is reasonable.

    1. This. Taxing property is fundamentally abhorrent and should be illegal across the board.

      1. I’ve heard this a lot but don’t understand the logic. Why is taxing property any more abhorrent than taxing, say, income? Taxing property within a given district to pay for services in that district, such as police, fire, lawn mowing, schools, etc., seems like one of the more fair taxes. Who else, other than community residents, should fairly pay for community services.

        1. Technically an income tax is a property tax because once you’ve earned the money it’s your property. The difference is that, since income tax is taxed only at the time you earn it, and you only earn the money once, you only get taxed once. With property taxes you get taxed on value that you’ve never gotten benefit from repeatedly, forever. Buy a house for $30k and have a 1% property tax? Ok, but if the property eventually ends up worth a million dollars you’re on the hook for paying ten grand a year for the privilege of not having your house seized. Basically, absent some prop 13 like mechanism, property taxes subject you to an unknown, unpredictable tax liability which is completely independent of any ability to actually pay it.

          For funding local services, local sales tax is probably the best mechanism. Where I live sales tax is 10%, about 3% of which is local. Most people spend most of their money where they live, and by its nature sales tax is guaranteed to be affordable for the taxpayer, it’s predictable, and your maximum tax liability is limited.

  6. I figure they’ll really need the money, to build a wall to keep the productive people from escaping.

  7. These proggies don’t understand that despite California insanity, California still wants its Prop 13. It’s a sacred cow here.

    There’s enough people here old enough to remember when grandma got taxed out of the family homestead. They remember the time when old people got tossed out onto the street because the tax assessor wanted a raise. There are enough people on fixed incomes in this state to know not to give Newsome a blank check.

    1. I remember 1978. Howard Jarvis was literally world famous, just for Prop 13. Remember his cameo in “Airplane!”? He and Prop 13 were outright celebrities. Envy of the rest of the country.

      Third rail is right.

    2. The good side of NIMBYism.

    3. On top of the new fire insurance/tax if they get rid of Prop 13 no way my mother could afford to stay in California and her house is paid off

  8. With regards to Obamacare:

    “Of course, I want people to have health care,” Vinson said. “I just didn’t realize I would be the one who was going to pay for it personally.”

    This is the mentality you find in California. And when they fuck it up badly enough, they’ll come to your state to escape the shithole they’ve created.

    Guess what they will do next.

  9. Government bureaucrats petitioning for tax increases that will pay for their retirement. Why is this not blatantly obvious to the general public?

  10. Grew up in CA but retired to Idaho last year. I sold the 1300 Sq/Ft CA house on which we were paying $4300/year in property taxes. Bought a 2700 Sq/Ft house in ID and are taxed at $1450/year.
    It’s insane.

    1. Damn. I live in Maryland and wish I only had to pay $4300/yr in property taxes. And I live in a modest 1200 sf house in a modest neighborhood.

    2. Hope the California attitude didn’t come with you. When you include all the proggies coming here to escape Portland and Seattle, there’s already more than enough to go around.

  11. I’d be moving out of state.

    Well don’t move here. Californios are toxic slugs.

  12. Putting a cap on one tax sounds great but it also puts pressure to raise other taxes, not to mention is a type of subsidy like boondoggle stadiums and other corporate tax sweetener relocation packages. The relatively lower real estate taxes are one reason for high California Real estate prices.

    If the removed tax caps lowered real estate prices might this be a BOON for companies and entrepreneurs now priced out by crazy property prices?

    1. “not to mention is a type of subsidy”

      Not taking money from somebody is a type of subsidy? No. It’s not.

  13. Not taking (tax) money from a business – in the form or tax abatement, sweeteners, relocation abatement etc – IS A SUBSIDY when other businesses/taxpayers have to pay those taxes.

    1. Fair enough. I should have allowed for that- sorry.

  14. Import Not Americans, Become Not America.

  15. I think that this split roll is considered a foot in the door to changing tax rolls for everyone, both commercial & residential. Consider our tax and spend history over the last 40 years. Do taxes ever go down or expire – never. Do businesses pay them – no, they pass them on to the consumers and renters. Consider also that our priorities are funding trains to and from nowhere, paying for college, health care, and other safety net programs for the children of illegals. We re-hired governor Brown – the guy who started the public employee unions and who didn’t require them to have any skin in the game initially. The pension crisis is the 900 pound gorilla in the room, and the teachers unions protecting the many unnecessary layers of administrators at the expense of our children isn’t far behind. Can we spend a little money on building reservoirs in anticipation of the next drought or just simply cut spending? – it doesn’t appear that will happen. After property taxes, my guess is they will come for your private pension dollars next – they are running out of revenue sources.

  16. Failure to take taxes from business owners hurts others

  17. This reminds me of Illinois sooo much. Billionaire governor wants a graduated tax. Supposedly only going to impact the wealthy. Yeah right.

  18. Unlimited property taxes combined with rent control. Can we predict the results?

  19. Why do liberals only care about greed of private companies that they can refuse to give any money to if they choose. Yet they support government greed forced upon everyone?

Please to post comments