"A Graduation Gift that Keeps on Giving: Fix Prop 13"

by Kitty Calavita, 2014-06 "Sonoma County Gazette" [www.sonomacountygazette.com]:
Graduation season is here. As we watch our children graduate from high school and college, it’s a good time to think about our investment in education and what we hope for the children of the future. One thing is for sure: We need a more steady, reliable stream of revenue to fund our schools than the highly volatile income tax revenue we now depend on, or ballot measures that sunset before the day is over. It is time, in other words, to talk about fixing Proposition 13.
Did you know that corporations pay lower property taxes than we homeowners do? That’s right. Prop 13 covers commercial as well as residential property, and since it passed in 1978 the proportion of California’s property tax revenue that comes from businesses has plummeted while the portion that comes from homeowners has soared.
Homeowners and businesses paid about equal shares through the 1970s, but now we homeowners pay 72% of all property tax revenue collected in California.
Commercial property changes hands much more rarely than residences do, and when it does sell corporations use loopholes to keep the change in ownership from being defined as a “sale” under the law so they can avoid a reassessment.
Think Chevron. By one estimate, Chevron owns about one-third of all the land value in Richmond. But Chevron’s land has not been reassessed for tax purposes since the 1970s. Its per square-foot property tax bill is lower than yours or mine. Chevron saves close to $1 billion a year in property taxes because of Prop 13. That’s money that could help fund our schools and restore our crumbling infrastructure. Chevron has lots of company.
Disneyland pays only 5 cents a square foot, while the average California homeowner pays eight times that.
Intel in Silicon Valley also pays 5 cents a square foot.
Speaking of Silicon Valley, because of Prop 13 new innovative companies like Yahoo! pay much higher taxes (Yahoo! pays $1.23 per square foot) than old, established companies like Intel. The Wall Street Journal owns 8.5 acres in Silicon Valley that it pays 3 cents a square foot on.
Yahoo! is doing well in spite of the disparity with companies like Intel, but smaller startups are hurt by having to compete on this uneven tax playing field.
The present system is unfair. It’s unfair to homeowners who have to pay a higher share of property tax than corporations like Disney, Chevron, and Intel, and it’s unfair to new businesses that have to compete with older companies.
It’s bad for the economy too. California has always been a leader in innovation and entrepreneurship, but Prop 13 gives old companies a break while penalizing the new.
It’s also bad for the economy because, as Robert Reich shows in his film, Inequality for All, a thriving economy depends on a “virtuous cycle” in which investments in education and infrastructure support growth. Since Prop 13 passed, California has lagged behind other states in such vital investments. From being in the top tier, California’s rank has taken a free fall and we are now tied for 49th place in education spending per pupil in real dollars.
We thought we passed Prop 13 to protect homeowners from rising property taxes. Instead, we are subsidizing big corporations at the expense of our children’s education and urgent infrastructure investments.
We need to close the loophole in Prop 13 so corporations pay their fair share. They can afford it. According to the nonpartisan California Budget Project, corporate income growth in California outpaced corporate income tax liability by more than 300% from 2001 to 2011. Nine states have corporate income tax rates higher than California’s, even as corporate profits here continue to soar, and California is the only state that does not assess commercial property regularly.
Lets’ give the graduation gift that keeps on giving and invest in our future, and that of our children. Let’s work to get the California Legislature to put a commercial property tax
amendment on the ballot to fix the loophole in Prop 13. We will be going up against the monied interests, but remember this: they have the money, but we have the votes.