Could we really fix Prop. 13?

12.06.12 - 2:06 pm | Tim Redmond |

(17)

Is the Howard Jarvis Era really ending?

Is it really possible? Could California be on the path to repair the damage of Prop. 13? Would Jerry go along?

You wouldn't think so -- it's been talked about for so long and so little has happened. But it's an all new year in Sacramento, and the era of Republican dominancy-by-minority is over (in fact, the era when Republicans will have any role at all in state government is pretty much over), and already, some changes are in the works.

Assemblymember Tom Ammiano notes:

“Prop. 13 is not the untouchable third-rail anymore. It’s more like the bad guy with the mustache who has tied California to the rails with the fiscal train wreck coming.”

Ammiano is introducing legislation to change the way Prop. 13 is interpreted -- to stop corporations for using loopholes to get around paying higher taxes after commercial property changes hands. But the polls now suggest the voters might be willing to do more -- the Public Policy Institute suggests that a sizable majority of Californians would like to see a split-role measure approved. That alone would provide billions of dollars in revenue for public schools.

By a 57-36% margin, voters responded positively when asked this question: Under Proposition 13, residential and commercial property taxes are both strictly limited. What do you think about having commercial properties taxed according to their current market value? Do you favor or oppose this proposal? Democrats favor the idea 66-26% and independents like the prospect 58-36%. Even Republicans are evenly divided 47-48%. Voters aged 18-34, who represent the future, favor the idea 65-28% but the idea is also popular among the most reliable voters, those 55 and older, by 56-39%. Splitting the tax roll is a popular idea in every region of the state, among men and women equally and especially among Asians (65-26%) and Latinos (58-36%) but also among whites (56-38%).

Now: That's before the commercial property industry and every major landowning corporation in the state pours about $50 million into a campaign to defeat any whisper of a split-roll. But we all know that big-money campaigns don't always win in California -- and right now, the guv is a pretty popular guy. So if he got behind a split-roll measure, and every progressive and labor group in the state (and most local elected officials) did, too, it would be at the very least a level playing field.

That, alone, would change California more than anything else the Legislature or the governor could do. It's out there; it's possible. I wouldn't try in 2013, but 2014 is looking pretty good.

Comments

Dominancy, is that like

Dominancy, is that like political Minstrelsy?

Posted by marcos on Dec. 06, 2012 @ 2:16 pm

I think so

Something similar, anyway.

Posted by tim on Dec. 06, 2012 @ 2:50 pm

Wouldn't any proposed change have to go to a voter proposition?

In other words, all Sac can do is put out a ballot measure - they canot change Prop13 themselves.

And those polls results you cited are all below the 2/3 majority it would take to change Prop13.

Most voters would be reluctant to change the rules even for commercial properties because they would worry about it being a slippery slope.

And of course they'd also worry about it causing inflation and would drive businesses out of State.

Posted by Guest on Dec. 06, 2012 @ 2:22 pm

Since Prop 13 is always cited as being the cause of California

having the highest rates of income and sales tax in the nation, are you also proposing that a relaxation of Prop 13 would be accompanied by a reduction in those income and sales tax rates?

Seems logical that you would seek that.

Posted by Anonymous on Dec. 06, 2012 @ 2:33 pm

A vote of the people

Yes, it would require a vote of the people, but takes two-thirds vote in the Leg to put it on the ballot. The Dems could do that now.

Income and sales taxes are an interesting question. After Prop., 13, Sacramento took on a lot of stuff that counties used to do, i.e. education. If the counties had that money again, could the state reduce some state taxes? I'd go for the sales tax first since it's so regressive. But we also have to remember that since Schwarzenegger's mess with the car tax, the state has been underfunded by billions a year.

Anyway, I'm not against discussing that, and I suspect nobody else is either.

Posted by tim on Dec. 06, 2012 @ 2:50 pm

Given how difficult it would be to enact any major tax changes,

and especially one as emotional and incendiary as Prop 13, a prudent approach might be to not frame any change as a tax increase, but just as a change of emphasis.

The city successfully did this recently with the change from a payroll tax to a receipts tax - by making it (almost) revenue-neutral, even some conservatives found that they could support it.

So a revenue-neutral approach to Prop 13 changes, with corporations paying a little more and individuals paying a little less, might just work.

Otherwise I fear it will become a political football and be DOA.

Posted by Guest on Dec. 06, 2012 @ 3:15 pm

Guest is right. We need to shift the way state taxes are raised.

A ballot measure in 2014 that proposes a split roll in exchange for a reduction in the regressive sales tax by an equal amount of revenue would be a much easier sell to voters. It would also give the state a far, far better tax policy. Even though it would raise the same revenue, consumers would have much more purchasing power. They would increase their consumption and/or savings, and jobs, business activity, and more taxes would follow.

The city's change to a gross receipts tax system brought many benefits besides merely a shift in how local tax money is raised. The city now has a tax system that makes it far easier to raise additional revenue by increasing the tax rates of one ormore of the tax categories a few hundredths of a percentage point. There won't be any reason to float a municipal bond again, for example, since the voters cand just as easily approve an increase to the rents or retail business tax by say .03 and raise the same revenue without all of the millions of dollars of bond interest costs or very expensive bond counsel costs.

At the state level the state legislature doesn't need any change to Prop 13 to easily raise taxes on commercial property. A simple graduated rent tax on commercial rent income does the trick, while offseting the new tax money raised by reducing regressive sales taxes. A graduated tax on commecial rents is a much simpler tax than trying to value commercial property every few years. Property valuation of manufacturing and large commercial properties is as much an art as a science. In contrast to a complicated split-roll tax system, every landlord knows how much rent they took in. A graduated rent tax can accomplish the same goals while taxing an appproximate amount from each commercial property as a split-roll property tax system would raise.

Posted by Guest on Dec. 06, 2012 @ 5:29 pm

The UK solved it's "property tax problem" by simply

abolishing it's property tax and replacing it with a "community charge" - a tax based not on property at all, but on residency.

Posted by Guest on Dec. 06, 2012 @ 5:41 pm

If commercial properties were

If commercial properties were assessed at market rate for tax purposes, then the tax rate for commercial properties would need to come down and that could happen legislatively.

Posted by marcos on Dec. 07, 2012 @ 12:02 pm

As someone said yesterday, making changes revenue-neutral in

a way such as you are suggesting here, would make amending the "third rail" much more palatable to the voters.

So increasing valuations but lowering the ad valorem rate is a decent idea, restoring more equity.

But that's still probably a step too far, too quickly. A quick win would be allowing revaluation when the beneficial owners of a company change hands. So if company A owns a property and company B buys company A, then that triggers a reval of the properties now owned by B.

Posted by Guest on Dec. 07, 2012 @ 12:14 pm

The California constitution

The California constitution allows a constitutional amendment to be made by either an initiative OR a two third vote of both houses. That means Prop 13 can be changed WITHOUT an initiative or referendum.

Posted by Guest on Dec. 06, 2012 @ 5:29 pm

I don't know if that is true, but it might be unwise.

Prop 13 came about by a populist movement, and it should be removed by a populist movement, and not by some tactical manoever. In a State where 2/3 of the voters own their own home and are protected from egregious tax hikes by P13, it is not appropriate to try and tinker with it in any way other than by convincing the people that it is right, proper and timely.

Posted by Guest on Dec. 06, 2012 @ 5:44 pm

I'm the kind of moderat voter who would have to be won over for

any changes to Prop 13 to be approved by the people. And I'm very clear about what can and maybe should be changed, and what should not.

At it's core, Prop 13 protects the 2/3 of Californians who own their own home from unpredictable and egregious hikes in their property tax. People who owned homes in the 1970's were getting their taxes increased by up to 100% per annum in some cases, and the resulting anger led to one of the most successful ever revolutions by the people against it's government. Municipalities lost their ability to control their own revenues because they were greedy, and those times cannot be allowed to return.

So I, and millions like me, will never vote to remove the core protection for peoples' primary homes. Don't ask if you want to be re-elected.

But that doesn't mean Prop13 cannot be amended and modernized. There is room to phase out some of the bigger anomalies. Those mostly exist on the corporate side and there may be a deal that can be worked out for that, and the voters may approve that as long as they don't think it will drive business out of CA and cost jobs.

It's possible that second and holiday homes could also have their protections reduced. I might also support that.

But leave the protections for homeowners in place. With low inflation, the 2% annual increases that are currently allowed should be adequate. And there is always the windfall uplift in prop tax when a property sells, or even when improvements are made. Since Prop 13 passed, prop tax revenues have still increased by an average of 7% per annum. why isn't that enough?

Posted by Guest on Dec. 07, 2012 @ 7:51 am

Oops, Detroit fires 11,000 city workers today

What that's juicy pension worth now, sucker?

The city workers shot themselves in the foot.

Posted by Guest on Dec. 07, 2012 @ 4:32 pm

Inaccurate Information

After reading this comment, I did some quick research. According to Reuters, Detroit is furloughing some city workers one day per week and plans to lay off 400 to 500 early next year. No surprise, considering we are still in the midst of an economic depression.

At least get your facts straight.

http://www.crainsdetroit.com/article/20121207/NEWS/121209870/detroit-pla...

Posted by Eddie on Dec. 07, 2012 @ 4:51 pm

Yes, I misheard the original Detroit story. However:

1) 4,000 Detroit public sector jobs have already gone

2) Another 5% of the workforce will be fired

3) The rest are furloughed onto shorter hours

Hardly a poster child for sustainable public sector pay and benefits. And if this ploy doesn't avoid bankruptcy, there will be thousands more layoffs. It's a warning signal.

Posted by Guest on Dec. 07, 2012 @ 6:48 pm

Trust

The democrats may run the show, that doesn't mean that people trust them.

Start fucking with prop 13 and out they go.

The right has plenty of money to toss around to show what a wastrel operation the state of Ca. is.

Posted by matlock on Dec. 07, 2012 @ 7:48 pm