Prop. 13 Tax Curbs Targeted For Attack By Calif. Lawmakers

Investor's Business Daily

The tax revolt that swept California and the nation starting in the 1970s may have run out of steam, but its landmark law, Proposition 13, is still largely intact.

That could change in the next two years as Democratic state lawmakers with a new two-thirds majority in both houses take aim at Proposition 13 tax restraints in their hunt for money.

Taxpayer advocates are girding for battle. "This year, for us, will be devoted entirely to defending Proposition 13," said Jon Coupal, president of the Howard Jarvis Taxpayer Association.

Backers of Proposition 13 warn that changes could pinch family finances and hurt businesses, large and small, in a state with joblessness still near 10% and costs higher than many locales.

Passed in 1978 with nearly 65% of the state voting yes, Proposition 13 is a shield and political symbol. It has kept California property taxes moderate and predictable, capping them at 1% of a property's value when it last sold, plus a 2% annual inflation factor.

Critics long blamed the law for state fiscal woes. But mainstream politicians knew it was popular and didn't want to touch it.

Other Taxes Already RisingThat was before November, when Californians OK'd a ballot initiative to raise income and sales taxes and put more Democrats in the Legislature. The new seats gave Democrats the power to enact tax hikes under Proposition 13's supermajority rule without Republican support, as well as to put amendments to the law before the voters.

Liberals hailed the events as the end of an era. "The Tax Revolt is over," Robert Cruickshank wrote on the Calitics blog.

The November vote was a victory for public-sector unions, which have the most to gain from weakening Proposition 13. It also put California business owners on alert for tax changes that fall hard on commercial property.

"Even the people who advocate a change in Proposition 13 don't seem to want a change in residential (tax) rates," said Allan Zaremberg, CEO of the California Chamber of Commerce.

Already, state Sen. Mark Leno wants to put a measure on the ballot to lower the two-thirds vote threshold for school district parcel taxes to 55%. State Sen. Lois Wolk introduced a bill that would ask voters to drop the vote threshold to 55% for library parcel taxes and bond measures.

In the Assembly, Tom Ammiano plans to reintroduce a bill seeking to revise the definition of an ownership change that triggers a new business property assessment. Voters' OK isn't needed. Even if the bill stalls, as it has in the past, business owners fear that its goal — squeezing more tax money from commercial property — will surface in other proposals, some with better odds.

The SplitThe biggest threat to businesses is a split roll, giving different tax treatment to commercial and residential property via higher tax rates or more frequent assessments. Proposition 13 foes long have favored the idea, which may have traction among voters despite their support for the law's homeowner protection.

In a December poll by the Public Policy Institute of California, 58% of likely voters favored taxing commercial properties at their current market value.

The business community is poised to counterattack if the issue comes before voters. One group, Californians Against Higher Property Taxes, has commissioned two studies showing how a split-roll regime that raises taxes on business would lead to more unemployment.

"The price of land is already higher than in the rest of the country," said Zaremberg. "To add to that would make it even more difficult to create jobs.

The split roll could also hurt small, family-owned businesses. Rex Hime, CEO of the California Business Properties Association, sees the biggest blow hitting properties such as strip malls, restaurants and small office buildings "owned by a family for a generation.

Parcel Taxes EyedBallot measures to allow more parcel taxes face some hurdles. The taxes can be highly regressive, placing the same levy on all properties regardless of their value or the owner's income.

The election calendar could be an issue too. If the Leno and Wolk measures make the ballot, it will be in November 2014, when Gov. Jerry Brown likely will be running for re-election. He was an enthusiastic backer of last November's tax hike. Two years from now, he may not be so eager to take on Proposition 13.

Brown opposed the motion when it was on the 1978 primary ballot, but backed it that November. Now his views are a mystery.

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