Our View: Prop. 13 again in sights of tax takers
Like the late comic Rodney Dangerfield, Proposition 13 "don't get no respect" — even though it's been a key to California's prosperity since voters enacted it in 1978. It limited the amount of property tax to 1 percent of assessed value, with yearly increases limited to 2 percent.
We remember one of the main reasons Proposition 13 was passed. As state property values doubled and tripled during the volatile 1970s, grandmothers on fixed incomes were being thrown out of their homes because they couldn't pay the hefty property tax increases.
Now, as happens every couple of years, Proposition 13 is under assault again. The Assembly Revenue and Tax Committee held hearings on changes in Proposition 13 to generate more revenue by closing supposed loopholes. Fortunately, both sides were heard.
Speaking in favor of changes was Jennifer Bestor, former treasurer of the Oak Knoll Parent-Teacher Association. She pointed out that, under Proposition 13, newly bought property is assessed at current value, and property values typically have risen over time, even allowing for the drops of the past five or so years. So a recently purchased home can be assessed at as much as three times the value — creating three times the property taxes — as a similar home that hasn't changed hands in decades.
"We're subsidizing a small set of owners extensively," she said. "The shirkers are freeloaders." She urged that all property, especially commercial property, be reassessed as often as every 15 years. Except that a "subsidy" grabbed by "freeloaders" implies money taken illicitly from someone else. But homeowners paying lower taxes are not taking anything from anybody; they're just having fewer tax dollars extracted from them.
Lenny Goldberg, executive director of the pro-tax California Tax Reform Association, called mainly for some commercial property to be assessed at higher rates than homes. He pointed out that much commercial property is tied up in trusts and limited-liability companies. Sometimes the ownership can change 100 percent, but because the underlying trust or LLC remains the same, there's no property reassessment.
"Is this a sensible system?" he said.
He said it was unfair that Intel Corp., Google and other big Silicon Valley companies own property that is not reassessed. But new startups are forced to pay higher current rates. "Do we really want to stack the deck against growing businesses? We're subsidizing a small set of owners extensively."
Critics just don't understand how property works in California, testified Douglas Wiele, a property developer, secretary-treasurer of the California Business Property Association and a member of the original committee that implemented Proposition 13. He said the existing assessment system predated Proposition 13. And he pointed out, "Landlords do not pay taxes. Tenants do. It gets passed through to the businesses, small and large, that rent there."
He said few companies in California own the property they operate on. "Most is leased. The taxes will flow to the operating businesses in those properties." So tax increases would not help small businesses, but slam them.
A proposal to more quickly assess commercial property, Assembly Bill 448, by Assemblyman Tom Ammiano, D-San Francisco, has been postponed to next year. After the November elections, it's possible Democrats will claim the two-thirds majorities in the Assembly and Senate needed to raise taxes.
In their lust for higher revenue, they might not stop at repealing Proposition 13 only for commercial property. After 2013, the "Little Old Lady from Pasadena" could be living out her "super-stock Dodge" because she will have been ejected from her home.