Back in the late 1970s, a conservative California businessman named Howard Jarvis put a proposition on the state ballot to cap property taxes. It was called Proposition 13. It passed. It has caused massive defunding of public services, especially public education. Prop 13 “rolled back both residential and commercial property taxes in California. In so doing, the conservative businessman set in motion a cataclysmic decline in the state’s revenues, triggering devastating budget reductions to public education and a host of public services. No other ballot measure in contemporary California history comes close to rivaling the impact of Prop. 13, whose aftershocks can still be felt more than four decades later.”
This year, there is an effort to reverse Prop 13. It is called Proposition 15. It would allow the state to raise the commercial tax rate.
Larry Buhl of Capital & Main notes that a large number of prominent Democrats, including Governor Gavin Newsom, have not endorsed Prop 15, which would help the state rebuild public services and make up for the dramatic decline in tax revenues caused by the coronavirus.
Why the silence of the Dems?
As of September 1, the Yes on 15 campaign boasted more than 400 endorsers, including county supervisors, mayors, city council members, members of the state assembly and senate, and school board members. Notably absent, however, are statewide elected officials, except for Sen. Kamala Harris and State Superintendent Tony Thurmond.
42 of California’s 45 Democratic U.S. Representatives
have not endorsed Prop. 15.
Alex Stack, spokesman for Schools and Communities First, the group behind Prop. 15, told Capital & Main that SCF didn’t expect any statewide Republicans to endorse.
Also missing on the endorsement list are the state attorney general, secretary of state, 42 of the 45 Democratic U.S. representatives, and the Democratic mayor of San Jose, California’s third-largest city. True, it was never expected that the secretary of state and attorney general would endorse any ballot measures, to avoid the appearance of conflicts of interest. That’s because the AG might be called upon to defend any proposition that becomes law, while the secretary of state oversees the balloting and vote counting process. But the silence of others remains unexplained.
Capital & Main checked in with U.S. representatives from six of California’s most Democratic districts — Ted Lieu, Jimmy Gomez, Jared Huffman, Maxine Waters, Jackie Speier and Zoe Lofgren — but none responded to repeated inquiries. Senator Dianne Feinstein’s office also did not respond. A spokesperson for San Jose Mayor Sam Liccardo said that he was not likely to endorse Prop. 15 but would not provide a reason why.
Efforts to repeal all or parts of Prop. 13 have failed — sometimes stymied by Democrats, sometimes by Republicans.
Stack had a theory about Liccardo. “San Jose has wealthy companies sitting on prime real estate. IBM and Intel are legacy companies paying $150 per square foot when the going rate is many times that.”
Launched by businessman Howard Jarvis in 1978, Proposition 13 put a ceiling on property taxes, basing taxes on their 1976 assessed value and capping annual increases at 2 percent per year. It also prohibits reassessment of a new base year value except in a change of ownership, or completion of new construction. Supporters of repealing Prop. 13, or in this case one part of Prop. 13, say that wealthy corporations, unlike homeowners, shouldn’t be allowed to pay taxes at rates set decades ago, especially when municipalities are hurting for revenue…
An analysis by the nonpartisan Legislative Analyst’s Office estimates that Prop. 15 would raise anywhere from $7.5 billion to $12 billion annually. That money would go toward schools and communities strapped by the COVID-related economic downturn.
Prop 13 was a way to disinvest in the common good. As a result, public services in California have been working in a permanent state of austerity. Prop 15 is a way to restore funding to public services including public education. Newsom is another neo-liberal that is largely funded by Silicon Valley that enjoys the super low tax rate afforded them by Prop 13. Newsom wants to please his business supporters. Prop 15 is a way to raise revenue and restore public funds that have been depleted by the pandemic. Tony Thurman, Kamala Harris and even Joe Biden are all supportive of Prop 15, This link includes a number of other national supporters of the proposal. https://ballotpedia.org/California_Proposition_15,Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative(2020)
I don’t live in California, so I don’t have a full grasp of the situation. In principal, I agree that capping property taxes is problematic. Here’s the other side of it. Property /real estate taxes doubled on a building. The owner rents to families and businesses with modest incomes. If he raises the rents to a level that compensates for the increase, is he going to be forcing people out? I know California would want to get their tech industry to contribute their fair share of taxes for the common good, but the little guy with the small business is already scraping by, as the pandemic has made abundantly clear. I don’t think the situation is as easy as it seems, but of course it is different depending on where you live.
https://www.latimes.com/opinion/opinion-la/la-ol-michael-dell-proposition-13-change-20140514-story.html
Thanks. After reading all the California notes, Prop 15 sounds like a no-brainer. Let’s hope the tax lawyers don’t find new loopholes.
I’m glad to know Biden and Harris support Prop 15.
When a bunch of representatives we’d expect to support something do not support it, it’s usually because they’re concerned about the deep pockets on the opposing side. There is huge money behind keeping Prop 13 in place, and the attack ads they run will say “So and so voted to raise taxes”.
Michael Dell might be first in line to support such a campaign. When he bought the Sheraton Miramar Hotel in Santa Monica, he used a Prop 13 loophole to pretend that there was really no new ownership so the $1.2 million in taxes he allegedly owed went unpaid. Prop 13 says that a new property tax assessment will only happen if a new owner becomes a majority owner. So Dell got his wife and two advisors to split the ownership with him. Voila, no one is a majority owner.
So activists need to kick into gear and give elected officials the backing they need to overcome any such opposition.
Prop 13 was sold to the voters as keeping Grandma in her house, and to some degree it was successful. But the end game was never about that. It was to allow wealthy corporations to legally rob the state of billions of dollars. The law provides loopholes that allow billions of dollars of commercial real estate to exchange hands without an official transfer of title, so that the tax basis is never stepped up and transfer taxes aren’t paid. One of the best examples of this type of graft is the sale of 1 Market Plaza, one of the most expensive buildings in San Francisco. “In San Francisco, a pair of Fortune 500 companies fraudulently cloaked a change of ownership of One Market Plaza, one of the city’s largest office buildings — to prevent a reappraisal that would have upped the structure’s value from some $113 million to around $400 million.”And, it’s only one example of countless others that collectively have devastated public education in California. https://www.sfweekly.com/news/prop-13-the-building-sized-loopholes-corporations-exploit/
Prop 13 keeps Grandma’s grandchildren poor.
Thanks for the explanation.
Newsom was married to the current girlfriend of Trump Jr. who spoke at the GOP convention. For many, politics is about winning. Underlying principles have no meaning and especially when an issue has a checkbook attached.
Ted Lieu takes on Trump. He supports some important progressive issues. It is troubling that he doesn’t support Prop 15. The following is irrelevant, but possibly interesting trivia. Lieu graduated from the same religious school in Ky. that Nick Sandmann attended. Sandmann spoke at the GOP convention and he is on McConnell’s campaign team.
How ridiculous to condemn Ted Lieu for attending a school with a Republican.
“Irrelevant trivia”
California has the largest GDP in the nation, is the 4th biggest economy in the world, and yet, has fallen to 38th in the country in education spending. We’ve gone from having the best schools to being pitiful. That’s Prop 13. Our public universities used to be tuition free for residents. No more.
Huge companies owning vast commercial properties, especially Chevron and Disney, are paying the same taxes they were in the 1970s, and in the meantime, 7,000 educators who my district laid off during the 2008 recession are still gone, not helping children. 26% of billionaires live in Los Angeles, but even they don’t have to worry about higher taxes because Prop 15 doesn’t raise residential property taxes. No homeowners or renters will pay more. And small businesses valued under $3 million will be completely protected. If my congressman doesn’t endorse Prop 15 in a hurry, he should be kicked out of the Democratic Progressive Caucus.
Ted Lieu.
Several other states have ways that commercial real estate is chronically undervalued. In NYC the rich and famous own a lot of commercial real estate. Most small apartments in Manhattan sell for at least $1 million. Why is it that the New York City schools suffer from chronic under funding? The system is designed so that the rich and powerful spend as little as possible on their fancy apartments and buildings while some of the schools in NYC remain in abominable condition.
Proportionate to its population, California spends less per pupil than South Carolina.
I was born in California. I have lived here all of my life. In 1978, I was 33 years old and owned a home. The property taxes were insane (I repeat, INSANE) and each month, that proptery tax cost more than the interest and prinicpal on the mortage payment. There also seemed to be no limit to how many times the legislature would raise those property taxes when the state revenues fell below spending.
I lived through that nightmare. I went through a bankruptcy because of that nightmare when the property tax JUMPED again and again and again, until we were not earning enough to pay our other bills since the property tax was automatically added to our house payment.
Anyone that wasn’t alive back then and/or did not live in California back then and did not own a home in 1978 is ignorant. They have no idea what it was like, how insnae the property taxes were in California and why that insnatiy sparked a rebellion among the voters that voted for Prop 13.
Older, retired Californians were losing their homes to the state, because on a fixed income, the property tax exceeded their retirement earnings. The state took their homes away from them when they didn’t have enough money to pay their property tax and many of these retired Californais had PAID OFF THEIR HOMES and did not have a mortgage. The state evicted those older Californais, threw them out of their homes that were paid for, and then sold those homes at auction for the property tax owed and not the value of the home.
Prop 15 taxes commercial real estate, not homes.
Prop 15 does not raise property taxes on residential property. It allows commercial property to be assessed at the current value. Commercial real estate rates in California have been frozen in time since 1978. It is a way to make commercial real estate to pay their fair share of property taxes.
I was in kindergarten in 1978. People who owned a home in 1978 got a huge tax break. The value of their homes vastly increased in the ‘90s and 2000s, but their taxes stayed low. There could have been a circuit breaker for property taxes based on homeowners’ ability to pay, but instead, the tax break went to everyone with property, including Chevron. People who try to buy a home after 1978 have the property reassessed and taxed at current market value. It’s worse for 30-somethings now than it was in the ‘60s and ‘70s. It’s impossible to compete with the Boomers. They don’t sell. They transfer. And we all have to pay higher income and sales taxes to make up the slack of low property taxes for corporations and Boomers. My students have to move back in with their parents after they graduate because the housing market is so unfair. There is a better way. Vote ‘Yes’ on Prop 15. It won’t raise Boomer taxes, and it will tax Chevron. It’s the only way to start finding our way out of the mess Howard Jarvis and Ronald Ray-gun got us into.
Isn’t there an argument to be made that taxes are better directed as progressive income taxes on income and wealth? Wasn’t the Howard Jarvis repeal fueled by people angry about high property taxes they were experiencing?
It’s true that sales taxes are also regressive. Often there are items exempt from sales taxes that are supposed to be deemed necessities as opposed to luxuries, but that does not always work.
Would a repeal of prop 13 really only affect businesses and not homeowners?
Prop 15 is specifically a tax on commercial real estate.
Taking a space, here, to urge Illinois voters to vote YES on the Fair Tax Amendment–it’s
(ssh! can’t use that word!) “progressive” income tax, a graduated tax that has been long overdue. Our state’s flat tax (& we’re one of only 6 states–that should tell people something) that still has that tax. Fair Tax will generate new income, put higher taxes on households w/income of $250K+, & would lower taxes for middle class & low income families. It will not increase taxes for anyone other than those $20K & above.
Teachers’ pensions have long been blamed for IL fiscal problems–not true. It’s because IL has had no new revenue sources for years. Fair Tax will change that.
Well past time.