California has been underfunding its public schools for years. The state has vast wealth but low taxes for commercial real estate, due to Prop 13, which was enacted in 1978 as part of a taxpayer revolt. It froze taxes on commercial real estate at 1975 levels.
Who are the plutocrats funding the fight against Prop 15? Investigative journalism Capital & Main followed the money.
As reporter Bobbi Murray shows, the tax system is badly skewed and vastly profitable properties are under taxes.
Prop. 15, the second of 12 initiatives to appear on California’s ballot, would establish a “split-roll” system to tax corporate and commercial property at presently assessed values instead of at rates based on purchase prices set by Proposition 13 in 1978. Chevron, for example, has saved over $100 million a year on taxes, as its property is assessed at 1975 rates.
At 1.8 million square feet, the sprawling Walt Disney Studios lot in Burbank, the headquarters of the Walt Disney Company media conglomerate, is also assessed at 1975 rates and gets taxed at roughly $5.60 per square foot.
Comparable rates in the area range from $150 to $200 per square foot—some older properties are still assessed at $10 to $30 a square foot.
Prop. 15 would reset the tax system in a way that could add billions to state coffers. A recent California Legislative Analyst’s Office assessment showed that, should Prop. 15 pass, “Overall, $6.5 billion to $11.5 billion per year in new property taxes would go to local governments. Sixty percent would go to cities, counties, and special districts. The other 40 percent would go to schools and community colleges.”
Homeowners and small business owners would not be affected by Prop 15.
Homeowner property tax rates are not affected by Prop. 15—there is no adjustment to the present homeowner tax structure… Small business owners with fewer than 50 employees wouldn’t see a tax hike, provided their combined commercial holdings in California are worth less than $3 million. The text of the initiative says a new tax structure would be phased in over several years—the earliest that most storefront shops would be reassessed is 2025.
The No campaign has been largely focused on stirring fears among homeowners that somehow passage of Prop. 15 will raise their property bills.
Small businesses would actually get a boost from a provision that eliminates an existing state tax on equipment investment. Under the current system, if you run a coffee shop and need to buy new stoves and refrigerators, you pay taxes based on the value of the expenditure. Prop. 15 would eliminate the tax for any expenditure under $500,000.
The No on 15 campaign, financed by wealthy businesses, has resorted to scare tactics and lies.
It was a pleasant surprise to see that the Chan-Zuckerberg Initiative has contributed to the Yes on 15 campaign.
Jacques Leslie, a regular contributor, wrote in the Los Angeles Times about Prop 15:
Proposition 15, the November ballot measure that addresses California’s rickety property tax system, has been in the works for five years. Its creators could have had no advance knowledge of the coronavirus pandemic. But COVID-19’s crippling of the state’s economy has underlined the importance of the initiative.
Proposition 15 would amend the state Constitution and deliver a sharp poke to one of the state’s most famous experiments in legislation via ballot measure: Proposition 13, the 1978 taxpayer-revolt initiative that stabilized state property taxes for many but also hobbled the state’s revenue base.
Proposition 15 is a partial repeal of Proposition 13, but the key word is “partial.” It applies only to commercial and industrial property, and only to holdings worth more than $3 million. If it passes, the assessment on such property would rise annually based on market value instead of being capped at a 2%-increase a year. (The tax rate would stay the same, 1% of the sale price of a property.)
This limited reform could generate proceeds as high as $12.4 billion a year, according to a February study by three USC researchers. Local communities would receive 60% of the revenue; schools would get 40%.
That money could turn out to be indispensable. Because of COVID-19, California is facing a $54-billion budget deficit over 19, California is facing a $54-billion budget deficit over the next year. State revenues are expected to drop by a staggering $41.2 billion compared with a pre-coronavirus projection in January. Los Angeles estimates a budget shortfall up to $400 million, with concomitant cuts in city services.
Proposition 15’s deep-pocketed opponents will portray the measure as an all-out assault on Proposition 13, an attempt to raise homeowners’ property tax. But, in fact, it would have no effect on the tax bills of most Californians. The measure exempts all residential and agricultural property, and because it targets only high-value commercial and industrial property, the owners of your local café and dry cleaners will probably be unscathed as well.
On the other hand, Disneyland, whose property tax is still based on its assessment when Proposition 13 passed, would have to pay more. In fact, the USC study found that most of the increase in state revenues would come from properties worth at least $5 million. A study released by Proposition 15 supporters this week shows that just 10% of the state’s of the state’s corporate properties — that is, the biggest ones — would generate 92% of the revenue raised by the initiative.
Besides improving the state’s bottom line, passage of Proposition 15 would have a huge symbolic effect. Before 1978, California invested generously in its future, and earned big dividends for its residents. Between the 1940s and the 1970s, the state built highways, dams and aqueducts, and its educational system earned a reputation for excellence. But Proposition 13 marked a retreat from public investment. Now California’s infrastructure is outdated, the state is ranked as the fourth-most-unequal state in the union and its school expenditures-per-pupil have dropped from 14th in 1978 to 39th. Propositition 15’s passage would mark the end of an era of magical thinking: You can’t have the benefits of government without revenues to pay for them.
Most important, Proposition 15’s reforms could go a long way toward overriding some of the most pernicious side effects of Proposition 13. For example, the initiative would eliminate the competitive tax advantage that longtime commercial property owners hold over recent buyers, which are often business startups. New businesses, a key to innovation (and in the wake of COVID-19, economic recovery) would face one less major obstacle in California.
The initiative would also stimulate new housing at a time when the state desperately needs it. Under Proposition 13, properties deliver so little revenue to municipalities that cities have encouraged retail business starts instead of housing development, because more retail means more sales taxes. Proposition 15 would prompt development of vacant urban land by increasing taxes on speculators who hold onto empty properties because their tax burdens are so low.(A 2018 UC Santa Cruz study found that vacant properties with near-market- value assessments were five times more likely to be developed than properties with 1970s and early 1980s assessments.)
The initiative would also close what has been a gaping loophole in Proposition 13 that has added to its worst effects. New, market-value property assessments of commercial properties kick in under current law only when majority ownership changes. That has enabled publicly traded corporations to avoid new assessments even though their stock ownership may have rolled over many times, and it allows landowners to buy and sell and yet maintain lower assessments by dividing purchases among enough entities so that none holds majority ownership. Companies such as Chevron, Intel and IBM own land whose assessments are still based on 1975 values, while nearby properties are assessed at values as much as 50 times higher, according to the initiative’s organizers.
That has enabled publicly traded corporations to avoid new assessments even though their stock ownership may have rolled over many times, and it allows landowners to buy and sell and yet maintain lower assessments by dividing purchases among enough entities so that none holds majority ownership. Companies such as Chevron, Intel and IBM own land whose assessments are still based on 1975 values, while nearby properties are assessed at values as much as 50 times higher, according to the initiative’s organizers.
When Proposition 13 passed, rising real estate values were pushing California homeowners’ property taxes so high some lost their homes. It solved that problem but created others, adding to the state’s epic gap between rich and poor. Without the virus, Proposition 15 ought to have won because it is just. Now it is also urgent.
A week ago, the Los Angeles Times endorsed Prop 15 and said it was about restoring fairness to the state’s broken taxing system.
Glad to see Chan Zuckerberg Initiative appears to be on the right side here – but the author of the Capital & Main article wrongly write that it is a non-profit. Actually it is an LLC.
Putting the donation in context- $6.3 million.
Gates and Zuck are investors (as individuals) in the largest for-profit seller of schools-in-a-box. The anticipated return for the business – 20% ROI.
The NY Constitution prohibits “wealth taxes,” cries for “tax the rich” would require a change in the constitution, a lengthy and contentious process …
.”Intangible personal property shall not be taxed ad valorem nor shall any excise tax be levied solely because of the ownership or possession thereof, except that the income therefrom may be taken into consideration in computing any excise tax measured by income generally. Undistributed profits shall not be taxed”
Robert Reich produces a series of videos for his ‘Inequality Media.’ His videos are somewhat like economics and public policy for “dummies.” Reich maintains that the real rift is not between Republicans and Democrats, It is between the 1% and everyone else. Our tax laws have been rigged to benefit the 1%. Billionaires can afford lobbyists that work for them while the needs of the working class and poor get ignored. It is interesting that Trump paid almost no taxes in this country, but he paid taxes in other countries in which the tax code is not written to benefit the 1%. Our federal and state tax codes are corrupt. Our country has socialism for the 1%, and harsh capitalism for everyone else. https://www.berkeleyside.com/2020/04/10/robert-reich-explains-how-the-ultra-wealthy-have-rigged-the-system
Another problem with our tax system is that billionaires often get tax breaks for destroying and meddling in the common good. Billionaires can set up and LLC and get a tax break for giving money to charters and vouchers. Privatization has been a windfall for the 1%, and a disruptive mess for everyone else. Also, when billionaires do not pay their share, working people pay more to cover the gaps or services get cut.
Jeff Bezos plans to set up a pre-school (tax write off) for poor students like the children of the employees Bezo underpays. This did not go unnoticed by Anand Giridharadas who has some advice for the 1%. “Pay your taxes!” https://the.ink/p/jeff-bezos-wants-to-start-a-school
“John King
Excited to join arneduncan cecmunoz Education_44
community for event Wednesday (9/30) at 6:30 PM EST in support of
JoeBiden
&
KamalaHarris
. We’ll discuss what’s at stake in this election for schools, students, & families. Please RSVP to join us.”
People who support public schools need to make it clear to Joe Biden that we do not want yet another round of ed reform echo chamber members directing US public education.
It is time the 90% of students and families who attend public schools get an advocate in the White House. Twenty years of this is enough.
My youngest child will graduate high school having never had a President who supports public schools or the students who attend public schools. Let’s not do that to the incoming kindergartners, who are already in a world of hurt because their government utterly failed to offer any assistance to public schools in a pandemic. They are going to need real advocates in government. We will not find them in ed reform. We have to look elsewhere.
Diane should do a post about this.
I know I’ll get a lot of flack, but I’m going to predict that Biden will give the Rheeformers what they want once he’s in the WH. There will be no more need to come trawling for votes from the supporters of public education.
Neither Biden nor Harris give me a lot of confidence in their ability to be Rooseveltian Democrats. It’s more about an “open arms
policy to Never Trumpers while surrogates dis the progressive base. It’s more about promising Big-Dollar Donors that “nothing will change” while the bottom falls out for tens of millions of people.
Never Trumpers, after all, are still Republicans first.
I hope to be proven wrong, but if I’m not the GOP will come roaring back in 2024.
Eleanor,
I don’t know whether Biden will bring back the failed Obama-Bush policies; I hope not.
But this is an election where–as Senator Sanders said eloquently–democracy hangs in the balance.
I don’t know whether Biden will make me happy all the time, but he won’t make me despair for the future of our country and the world as the Idiot in the White House now does.
Get rid of Trump now.
Vote.
Trump is the worst president in American history.
He is the stupidest, most arrogant man ever to hold that office.
I will energetically vote for Biden and Harris.
I know I’ll get a lot of flack, but in 2016, I read here (from certain posters, not from Diane Ravitch) that a lot of people predicted HRC would give the Rheeformers what they want once she was in the WH. I read that she would have no more need to come trawling for votes from the supporters of public education.
In 2016 I read here (from certain posters, not from Diane Ravitch) about how neither HRC nor Tim Kaine give people a lot of confidence in their ability to be Rooseveltian Democrats. (I’m ignoring the fact that Kaine was hugely pro-public school because in 2016, what everyone said was important was not that Kaine was one of the strongest supporters of public education in the Senate — even stronger than Bernie! — but that the focus should be on how they would both follow the orders of the corporate masters.)
In 2016, I read here (from certain posters, not from Diane Ravitch) that it was of vital importance to spread the word about HRC and Tim Kaine’s “open arms policy” to Wall Street, and I read here that all of HRC and Kaine’s “surrogates” did nothing but “dis” the progressive base. Of course, the ONLY progressive “base” that was being “dissed” was not Bernie himself but the people urging voters not to vote for the democrat and amplifying the message that it’s no big deal if Trump wins, and Trump appointing 2 or 3 new far right justices was nothing to worry about. I read here from people who were very angry those progressive voices urging the defeat of the democrat were “dissed” instead of being legitimized as the mainstream media and Republicans did. After all, those “I hate the democrat, don’t vote for them” progressives who allowed no “dissing” of their “don’t vote for the Democrat” message were right, weren’t they? In 2016, it wasn’t a big deal for Trump to win. What was important was not voting for the democrat.
In 2016, I read here (from certain posters, not from Diane Ravitch) that HRC and Tim Kaine had been secretly promising Big-Dollar Donors that “nothing will change”. And whether or not that is true didn’t matter, because it seemed true.
And in 2016, believing that something horrible “could” happen if the Democrats were elected was more important than believing something that was much, much worse WOULD happen if a man who had already shown us who he was – a con man who succeeded by fomenting hate – was elected.
But in 2016, the people who were so concerned about the democrats because they wouldn’t get enough “change” got exactly what they wanted — change.
Some of us think that the change of 2016 – the way our country is today – is not just horrible and harmed many people, but has put democracy itself in grave danger.
I wanted to be proven wrong in 2016 about my fear of how much danger all of us – including progressives – would be in with 4 years of Trump.
I wanted the anti-Democrat progressives to be right when they kept telling me how important it was to push the narrative “the democrats can’t be trusted” as much as possible in the fall of 2016.
And everyone who is pleased at the 2016 outcome should definitely repeat the successful tactics they used to push their favorite narrative that “the democrats can’t be trusted”. After all, what is more important? Pushing the truth that Trump is unfit, corrupt and can’t be trusted? Or empowering Trump even more by amplifying the “feeling” that the democrats are entirely corrupt and can’t be trusted and sowing doubt in the democrat?
Some people still seem to believe that it is important to drown out all the deluded democrats saying Trump is unfit and corrupt and can’t be trusted and replace it with their preferred message of “the democrats can’t be trusted”. They want to amplify “the democrats can’t be trusted” message just like they did in 2016, presumably because they liked the “good” outcome we had in 2016.
Even if I doubted they were right in 2016, I WISHED they were right. I would have been glad to have them say “I told you so, it’s no big deal if Trump wins”. But they weren’t right. So I don’t understand why anyone who doesn’t want the same outcome would be pushing the same narrative as 2016.
But I do understand why someone who LIKED the outcome of 2016 would want to do the same thing.
We can amplify the message that “the democrats can’t be trusted”. or we can amplify the message that Trump can’t be trusted and is corrupt and unfit.
I think the choice of message that people want to amplify says a lot about what their goals are.