Few issues in California politics are as incendiary as Proposition 13, so when San Francisco Assessor Recorder Phil Ting said he wanted to make the case on Calbuzz for altering how the famous tax cut initiative handles commercial and residential assessments, we said go for it. Here’s his offering — one in an occasional series of discussions about reform in California.
By Phil Ting
Special to Calbuzz
Lately there’s been a lot of talk about the need for substantial change in dealing with California’s budget. And while I am a strong proponent of improving efficiency and accountability in government, I also recognize that fundamental reform only comes when we confront the sacred cows of our political system.
Now is the time to reconsider the most sacred cow in California politics — Proposition 13 — the 30-year-old taxation scheme that has handicapped our state’s revenue stream and forced draconian cuts to some of our most vital state services.
Some people aren’t ready for this. Certain Proposition 13 defenders have argued against reform, noting that property tax revenues have risen 800 percent since the time of Proposition 13’s passage. But this figure is misleading: it fails to account for 30 years’ of inflation and a 63-percent growth in California’s population.
Using a similar metric, the cost of tuition at the University of California has risen by 1,000 percent in the same time period, from $720 to $8,020, according to the California Postsecondary Education Commission. It’s clear that when put into context, a rise in property tax dollars flowing to the state since the 1970s is hardly sound reasoning for dismissing a discussion about substantial reform.
A good reason to discuss reform is that when first passed, the proponents of Proposition 13 touted the protections it offered California homeowners. But today, the biggest beneficiaries of Proposition 13 are large companies and corporate landowners.
Proposition 13 actually opened up vast loopholes for corporate landowners to evade property taxes and shifted the tax burden to individual homeowners. This shift also brought about a dramatic decline in overall revenue stream from property taxation.
For example, 30 years ago in San Francisco, commercial property owners contributed 59 percent of property tax revenues and residential property owners contributed 41 percent. Today, we see a virtual flip: commercial property owners contributed just 43 percent of property taxes in 2008 while residential property owners contributed 57 percent.
As corporate property owners contribute less to revenue, dollars lost through Proposition 13’s tax loopholes handicap our ability as a state to educate our children, keep our streets safe and invest in important infrastructure projects.
To begin to address this problem, I have begun to organize a grassroots campaign of Californians who are behind a split roll system. Thousands have already been mobilized. Our group, “Close the Loophole” would split the property tax rolls — assigning unique tax levels to corporations and homeowners and leveling the property-tax playing field.
According to a recent analysis by the State Board of Equalization, taxing commercial properties at market rate would result in $7.5 billion dollars a year in additional revenue. This reform would continue to keep homeowners in their homes but would also make corporate land owners pay their fair share and bring needed revenue into the state.
While instituting a split roll is not an immediate panacea for our state’s $26 billion deficit, it would certainly help close the gap. Californians are fed up with an education system that is one of the worst in the country, cities and counties that are struggling to provide even the most basic services and political gridlock in Sacramento that has forced our state to the brink of insolvency.
We deserve better. If we are serious about moving California out of this economic and political morass, we need to consider reforming all the sacred cows, including Proposition 13.