September 21, 2020

Editorial: California Prop. 15 would cause businesses to pay fair share of property taxes

For more than 40 years, California has endured a contorted property tax system that punishes home buyers, chills housing construction and rewards businesses who skate by when assessments are set.

Proposition 15 would ease the worst of these abuses while protecting homeowners and small businesses. It sets a path that should continue in overhauling an out-of-whack tax code.

For all its progressive image, California has a lopsided revenue system that has evolved since a fateful vote in 1978 that redrew the rules on property taxes. That measure, known as Proposition 13, largely froze homeowner taxes, but it did the same for business holdings. When property changed hands, taxes could be reset, but that happened less often with commercial and industrial land when deals could be structured to avoid reassessment. The result: Businesses enjoyed low taxes while new homeowners faced higher levies as housing was resold.

Prop. 15 offers a solution to this unfairness. It calls for splitting the rolls, with residential property staying within the present protections while it sets more timely assessments for large business holdings. The heart of the original law that protects homeowners from sharp tax boosts will be saved. Businesses won’t get an undue break.

The proposed change may net $6.5 billion to $11.5 billion to be split 60% for local government and 40% for schools. In a bow to small operators, it would exempt commercial properties worth $3 million or less. That feature helps protect tenants such as restaurants and stores scraping by on thin profit margins.

Opponents claim that now isn’t the right moment for a tax increase, given a pandemic-ruined economy and 13.3% jobless rate. But the changes in Prop. 15 would take place beginning in July 2022 and could be delayed longer if the Legislature chooses. That flexible timetable will allow for the economy to recover.

The measure comes to the ballot through a signature gathering supported by unions and policy groups. They were fed up with a Legislature fearful of enacting reforms to the original Prop. 13, regarded as sacrosanct. Instead lawmakers have devised other tax schemes to compensate, saddling the state with higher taxes and more volatility.

California has a chance to end a glaring unfairness in tax rules. Vote yes on Prop. 15.

This commentary is from The Chronicle’s editorial board. We invite you to express your views in a letter to the editor. Please submit your letter via our online form: SFChronicle.com/letters.

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