Bid to hike commercial property taxes in California could raise $6 billion to $10 billion a year, analysis finds

By February 6, 2018 No Comments

By Liam Dillon

A proposed November 2018 ballot initiative to increase property taxes on commercial land could add $6 billion to $10 billion to state coffers annually, according to a report by the state’s nonpartisan Legislative Analyst’s Office.

The proposal would make a dramatic change to rules implemented by California’s landmark Proposition 13 ballot measure that capped how much property tax bills could increase. Under the new measure, the state would receive more tax dollars from commercial and industrial properties by assessing them at their current market value, an effort known as “split roll” because existing tax protections on homes would remain in place. The new revenue would go to local governments and public schools.

While the amount of tax dollars raised by the proposal would be significant, the report from the legislative analyst included warnings. The revenue would depend heavily on the health of the state’s real estate market and could therefore be volatile. Similarly, raising property taxes on businesses could cause firms to leave or choose not to relocate to California, the report said.

“Overall, the measure’s effect on the health of the state’s economy is uncertain,” the report said.

Proposition 13 passed in 1978 amid concerns that rising property taxes could force people out of their homes. The ballot measure limited property taxes to 1% of a property’s value at the time of purchase and ensures that the assessed value on which taxes are based can increase by a maximum of only 2% a year — no matter how much a property’s market value goes up.

Backers of the proposed split roll initiative include the League of Women Voters of California and community organizing nonprofits California Calls and PICO California. They need to collect 585,407 valid signatures for the measure to make the November ballot.

None of the groups so far has reported raising the substantial sums needed to help qualify the measure or to wage what would likely be an expensive campaign opposed by business groups.