I have previously commented on Calif Prop 13 and the attack beginning on commercial property. For those who don’t know, property tax in CA is set at the time of purchase at 1% plus local taxes that make it about 1.2-1.3% of purchase price. That is locked in and can only increase 2% of the total per year. A $300,000 purchase will have first year tax of about $3750. It can go up $75 the next year.
I knew that when they had a super majority, the RATS would attack Prop 13, which they have despised and targeted since its passage in 1978. The first area, as the article indicates is commercial property. The RATS think they can go after commercial property owners first because they will pose less opposition at this time than homeowners. But that will be coming.
In college I taught real estate law and economics. You do not have to have such background, however, to know what is going to happen when a commercial property owner gets a tax increase. Of course, that increase is passed onto the tenant. And, of course, that increased business cost is passed onto consumers. We pay more for goods. Well, poor people, get ready for that.
Some fifteen years or so ago I read an article that claimed that 2/3rds of the tax benefits from Prop 13 are being accrued by businesses. It is probably even more now. This makes sense as businesses sell property less often than individuals.
However, some businesses have gotten more clever at avoiding taxes. They have come up with ways by which a property can be transferred from one company to another without it counting as a sale, thus avoiding a reassessment and property tax jump. I wouldn't doubt if 75-80% of the tax benefits from Prop 13 are now being accrued directly by businesses.
If Prop 13 went away, there is nothing that says that businesses will have to have their property taxes increased. When I was living in Colorado my property was reassessed every year. Even though my house value more than doubled over the time I owned it, my property taxes didn't. This is because I lived in a relatively conservative city. The board lowered the mill levy each year so that taxes went up at a rate far lower than my house's value.
I used to be a big supporter of Prop 13. Politicians, however, have completely undermined it. Money that is collected locally is now sent to the state. Money collected by state organizations is funneled back to cities and counties. Some people have to pay Mello-Roos fees which unlike property taxes are not deductible. Everyone has a hand in everyone else's pocket.
If Prop 13 were completely eliminated then each city could still set property taxes as it wished. Those cities that wanted to retain businesses could lower property taxes across the board or just on businesses in general, or on a case-by-case basis as is done throughout the country to attract companies.
For a long time the Democrats didn't have enough votes to increase taxes, but they had more than enough votes to pass hundreds and thousands of inane laws that increased the cost of California government without properly funding it.
I believe that the voters by-and-large were OK with this. I think that's why the Democrats never got the 2/3rds majority they needed: the voters wanted their cake without having to pay for it. Redistricting confused people and now we have enough Democrats to vote for taxing and spending. If they go too far out of line I believe that liberal voters in a few key districts will hold their noses and vote for just enough progressive "republicans" to keep the goodies flowing and the taxes from growing.
With or without Prop 13 we're going over the cliff.
If you've driven along Hwy 1 up near Monterey you know we can't have picked a more beautiful cliff to drive off of...