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Prop 13 is once again under attack. It is now being challenged by The League of Women Voters, The California Federation of Teachers, Civil Liberties Union of Southern California., and PICO.  This proposed amendment to Prop 13 called the “Split Roll Tax” would tax commercial retail, office and industrial property based upon the properties annual fair market value. Some small business and agricultural properties could be exempt. Residential properties are not supposed to be affected.

Proponents of the bill estimate that it will net between $7.5 to $10 billion, and the money would be allocated to schools (40%) and other local government costs (60%). Sounds good right?

Before we continue, a bit of history…. Prior to the change in legislation, the tax rate throughout the state averaged just under 3% of market value, and there were no limits on increases for the tax rate or property value tax assessments. It was not uncommon for a property’s value to increase 50% or even 100% in a year, and property tax bills increased accordingly. Individuals began losing their properties at a feverish pace.

Proposition 13 was originally passed to put a stop on out of control increases on property taxes and overwhelmingly passed by almost two-thirds of all California voters on June 6th, 1978. Under the Prop 13 tax reform, property tax valuation was set at the 1976 assessed value and could only increase a maximum of 2% per year unless the property was sold.  Prop 13 also enacted legislation that ALL state tax rate hikes had to be approved by a two-thirds vote. This was a key piece of legislation that was purposely placed into the bill to protect the taxpayer. Remember… Everyone votes but only property owners pay.

NOW- to understand the true impact of the proposed amendment, here is the other side that proponents of the bill are NOT telling you… Currently, the bill is targeting “rich” property owners. Truthfully it is NOT a tax on the rich, but a progressive tax which will affect everyone.

When a commercial property is leased, there are clauses embedded in the lease document that allows the property owner to pass through expenses to their tenants. If property taxes rise, so do rents. For the businesses that survive, they will certainly not absorb the costs, so increasing costs will be passed onto all consumers.

Truthfully, this is a tax hike on all, rich and poor alike and cleverly hidden by proponents that are watering at the mouth at yet another tax hike. Californians will undoubtedly continue the exodus to other states seeking relief from exorbitant housing costs, some of the highest income tax, gas and sales tax rates in the country.