Coming up on this November 3’s election ballot is California Prop 15: Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative, also known as the California Schools and Local Communities Funding Act.
It’s a constitutional amendment whereby California commercial and industrial properties (commercial agriculture not included) would be taxed based upon market value as opposed to purchase price. Residential properties would not factor in. Likewise, there would be an exception for properties with owners whose California holdings come in at under $3 million, and also exempted would be tangible personal property owned by small businesses, as well as the first $500,000 in tangible personal property owned by larger businesses.
The status quo in terms of California real estate taxes can be traced back to 1978, when the passage of that year’s Prop 13 not only put a ceiling above property taxes, but helped to spur a widespread attitude disfavoring taxes across the United States, one which would be epitomized by Ronald Reagan’s presidency through the 1980s. (Incidentally, Reagan was Governor of California from ‘67 to ‘75.)
As time’s gone on, real estate owners have perpetually benefited from their California property taxes being tied to their properties’ purchase prices, as in many cases while the value increases the taxes remain enviably low. The 40-plus-year-old real estate tax laws have been a regular target for revision for years, yet have stayed stubbornly on the books.
But if our real estate tax laws are revised come election time, California anticipates between $7.5 billion and $12 billion (depending on the condition of the real estate market) in yearly revenue. The money would go to K-12 public schools, local governments, and community colleges. Local governments would be granted 60% of the monies, with 40% pipelined to the schools.
Opponents of the proposition reject it on the basis of being yet another Democrat-driven tax hike—one which takes advantage of voter sentimentality over kids and schooling, to boot. It bears noting, however, that the constitutional amendment was spearheaded by state citizens (with most of its funding coming from the California Teachers Association, SEIU California, and the Chan Zuckerberg Initiative).
Amid the historic coronavirus pandemic, with countless California schools and local governments more strapped for cash than ever, Prop 15 presents an opportunity for a boost.