Editorial, The San Diego Union-Tribune | Proposition 13, the landmark 1978 ballot measure credited with touching off a national anti-tax revolution, has never stopped being controversial. Critics say its cap on annual property tax increases and its two-thirds voting requirement for government bodies to impose new or higher taxes has hamstrung California and been a public policy disaster. That argument, of course, is undercut by the fact that — despite these obstacles — state residents still have among the nation’s highest overall tax burdens.
Nevertheless, it’s far past time to fix a jaw-dropping Proposition 13 loophole that makes it easy for businesses acquiring property to avoid the automatic reassessments faced by people buying homes. All they have to do is ensure that no one in a partnership taking ownership of the property has more than 49 percent control of the partnership. In such a transaction, it is the maddening conclusion of Proposition 13 that there is not a change in ownership.
Even the Howard Jarvis Taxpayers Association, whose namesake sponsored Proposition 13, realizes this is wrong. It backed reform legislation introduced in 2014 that would have defined ownership as having changed whenever at least 90 percent of a property shifts hands, even if there is not a majority owner.
But that legislation died abruptly in the California Senate amid rampant scuttlebutt that Proposition 13’s critics didn’t want to fix its biggest flaw. Why? Because that flaw is a powerful argument for “split roll” — the insider term for a plan to preserve Proposition 13’s protections for homeowners while ending them for commercial properties such as hotels, shopping centers, warehouses and factories.
Now the split roll push has begun. Public employee unions and liberal groups are gathering signatures to put a measure before state voters in the high-turnout November 2020 election that would mandate annual reassessment of commercial properties. The Legislative Analyst’s Office estimates this would generate $6 billion to $10 billion annually in new revenue, of which 60 percent would go to local governments and 40 percent to schools. A fact sheet touting the measure depicts these funds as manna from heaven that will improve schools, parks, transportation, health care and a long list of services.
But the truth is the new revenue instead inevitably would go to deal with the pension tsunami inundating local governments and school districts.
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