In 1978, Californians voted to change the way their property was being taxed saving thousands of owners from losing their homes and commercial real estate. In the 1970’s, due to a combination of severe inflation, population growth, and increased housing demand properties were routinely reassessed spiking taxes.
People who had lived in their homes for decades and now on fixed incomes were then unable to afford property taxes and forced to leave their homes. The voter initiative Proposition 13 led by Howard Jarvis and Paul Gann promised to roll back property assessments and limit how real estate was valued for tax purposes. It passed with 62.6% approval.
The Jarvis-Gann Act decreased property taxes by assessing property at its 1976 value and restricted annual increases of the assessed value to an inflation factor, not to exceed 2 percent per year. The Act also prohibited reassessment of a new base year value except when there is a change in ownership or a completion of new construction. These rules apply equally to all real estate, residential and commercial—whether owned by individuals or corporations.
The other significant aspect of the initiative is that it required a two-thirds majority in both legislative houses for future increases of any state tax rates or amounts of revenue collected, including income tax rates. It also required a two-thirds vote majority in local elections for local governments wishing to increase special taxes. (A "special tax" is a tax devoted specifically to a purpose: e.g. homelessness, road repair or public safety; money held separately from the general fund.)
There have been numerous unsuccessful attempts by politicians to take back the ground gained for taxpayers with Prop 13. (Even with Prop 13 protections California still has the 16th highest property taxes in nation.)
November 3, 2020, there will be another push to convince voters to increase taxes, this time on commercial real estate. Under this initiative to change Prop 13, county assessors would split their tax rolls into two lists. Homeowners and some small businesses would still receive the full Proposition 13 benefits: a 1% tax based on a property’s purchase value and annual tax increases of no more than 2%.
However, commercial and industrial property owners would be required to pay much more. While their tax rates wouldn’t change, beginning in 2022 the levy would be based on the current market value of the real estate. Business property values would have to be updated by county assessors at least every three years. Increasing the taxes to businesses will be passed to consumers in the form of high prices.
Liberal politicians and California’s most powerful public employee unions — including Service Employees International Union, the California Teachers Assn. and the California Federation of Teachers are behind the split-roll ballot measure. Their decision to endorse the effort brought tens of millions of dollars to fund the campaign.
The ballot measure title is California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative. This is simply another revenue stream for an already bloated and wasteful government. California has some of the most dysfunctional and expensive government agencies from schools and Caltrans to the Department of Motor Vehicles.
Here are a few examples of gross waste by governmemt. Those “Your Road Taxes at Work” highway signs cost us $32,644.25 each. Instead of purchasing and running natural-gas powered clean buses at a cost of roughly $300,000 each, San Diego MTS decided that political correctness demands they pay 3 times more per bus for all-electric buses – or $900,000 each.
Thirty percent of Caltrans’ $18.1 million local maintenance budget went for picking-up after people in 2018. So, $6.2 million went toward collecting litter off the freeway and for cleaning out the debris left behind by homeless encampments abandoned in the wake of 72-hour eviction notices.
More than half (57%) of the Caltrans employees earns $100,000 or more per year – with 11,256 Caltrans employees receiving $100,000 or more. For every “active” project at Caltrans, there are more than six members of the $100,000 Club. The average compensation at Caltrans is $113,554 a year. The median income for Californians is just $32,482 per capita.
Caltrans has 7,494 engineers – that’s more than three engineers for every active project. In spite of the Legislative Analyst’s Office saying Caltrans is overstaffed by 3,500 the agency is expanding.
Gas tax funds were used to pay Holistic Exchange $300 for massages for 12 staff members in Merced County. Local transportation agencies spent gas tax funds on a $5000 trip to Paris, Munich, and Milan, $2700 for a trip to Las Vegas, and a visit to China totaling more than $5,000.
State government needs no more money, but Californians will probably vote to tax businesses. In a socialist state businesses are considered evil.
(Get Lou’s podcast at “No Hostages Radio” and his articles at nohostagesradio.com)
###