Big real estate interests managed to defeat Prop 15, intended to raise taxes on commercial real estate to produce billions for public schools.

The Los Angeles Times reports:


California voters have rejected Proposition 15, a ballot measure that sought to force large businesses to pay higher property taxes but likely fell victim to concerns about its economic impact on employers and consumers amid the pandemic-sparked recession.

The defeat, projected by the Associated Press on Tuesday, came with unofficial results showing almost 52% of votes were cast against the measure — a level of opposition that remained consistent through the early counting of ballots on Nov. 3 and the week that followed. While returns won’t be certified until early next month, the AP analysis concluded that there are unlikely to be enough ballots remaining to change the outcome.

“California voters understood the very real threat Proposition 15 presented to small businesses, farmers and consumers,” Allan Zaremberg, president of the California Chamber of Commerce, said in a written statement. “Voters in California smartly recognized that enacting the largest tax hike in California history would have been devastating to jobs, our economy and California’s future competitiveness.”

Since its inception, Proposition 15 was a fight about a different ballot measure — Proposition 13, the 1978 landmark initiative that created a tight cap on property values and tax rates. The new proposal’s supporters spent years crafting their plan to strip high-value business properties from the protections provided by Proposition 13, arguing that it had allowed powerful corporations to avoid paying property taxes they could easily afford. The November ballot measure could have generated as much as $11.5 billion a year for public schools and local government services once fully implemented.

Where Proposition 13 sets the value of a property by its purchase price and caps the annual tax at 1% of the value, Proposition 15 would have generated new tax revenue by allowing more frequent valuations of commercial and industrial property holdings worth $3 million or more. Some lower-valued properties would have also been swept into the system because their owners have large portfolios of property across California.

Proposition 15 was explicit in its protection of residential property tax rules, though some of its opponents ominously warned that it was the first step toward a complete overhaul, or outright repeal, of Proposition 13...

Voters were not swayed by the promise of new, substantial tax revenue. Approximately 40% of the revenue would have been sent to K-12 schools and community colleges, while the remaining 60% would go to counties, cities and special districts for services such as law enforcement and fire suppression. The Berkeley poll found that less than a majority of middle-aged voters and those who described themselves as moderates or conservatives believed the new tax revenue was needed.

Howard Jarvis, chief sponsor of the controversial Proposition 13, signals victory as he casts his own vote at the Fairfax-Melrose precinct. June 6, 1978 photo by Ben Olender/Los Angeles Times. For From The Archives.
[Howard Jarvis, sponsor of Prop 13, which starved California’s schools]

While the homeowner tax protections of Proposition 13 have remained strongly popular over the last four decades, liberal interest groups and labor unions believed few voters realized that the low-tax rules also applied to multimillion-dollar corporations. Numerous studies revealed that many of these companies, many headquartered in Southern California and the Bay Area, operate in facilities where land values have changed very little since the 1970s — even as new businesses and homeowners alike pay taxes on property assessed more closely to market value.

Business groups that funded the opposition effort — contributing to a campaign with combined donations of more than $125 million — sought to divert attention away from large corporations and focus on Proposition 15’s potential impact on small businesses. Their advertising campaign hammered away at the fact that business owners who lease their location are often required to pay some, or all, of the building owner’s property taxes.