The signature-gathering effort for a union-backed initiative that would result in higher property taxes for commercial and industrial property will begin Sunday in downtown Los Angeles.
What supporters have dubbed the Schools and Communities First initiative would allow for annual unlimited reassessment of commercial and industrial properties to their fair market values.
Under terms of Proposition 13, the landmark property tax reduction and limitation measure approved by voters on June 6, 1978, increases of assessed value of real property are restricted to 2% per year except if it is sold or there is construction.
The measure would mainly apply to large and older businesses, as it exempts owners of commercial and industrial properties with combined value of $3 million or less. There are also exemptions for all residential and agricultural property. The initiative also exempts from taxation $500,000 of combined tangible personal property and fixtures from small businesses.
The initiative would not change Proposition 13’s tax limit of 1% of the property’s full cash value.
If approved by voters, the initiative would result in a net increase in annual property tax revenues of $7.5 billion to $12 billion in most years, depending on the strength of real estate markets, according to analysis by Legislative Analyst Gabriel Petek and state Director of Finance Keely Martin Bosler.
The analysis also found after backfilling state income tax losses related to the measure and paying for county administrative costs, 40% of the remaining $6.5 billion to $11.5 billion would be allocated to schools with the remaining 60% going to other local governments.
“Wealthy investors and big corporations have not been paying their fair share, leaving California with underfunded schools and overcrowded classrooms and with some of the worst ratios of counselors, librarians and nurses per student,” said Tyler Law, a representative of the campaign on behalf of the initiative.
“By closing corporate loopholes and ending shady tax schemes, we can reclaim $12 billion every year for schools and vital local services.”
Susan Shelley, vice president, communications of the Howard Jarvis Taxpayers Association, dismissed the argument that commercial property owners are benefiting from an unintended “loophole,” citing rejection of Proposition 8 on the same ballot as Proposition 13, which would have created a split-roll property tax system, allowing commercial property to be taxed at a higher rate than residential property.
“The split-roll measure is named `Schools and Communities First,’ but it could be truthfully called the `We don’t have enough money to cover our overpromised pensions, and they come first’ initiative,” Shelley said.
“The split-roll initiative would be a huge tax increase on every business in California, simultaneously and repeatedly. Taxes would rise almost immediately for every shopping mall, hotel, restaurant, office building, factory, warehouse, self-storage facility, car wash, parking structure, movie theater, sports stadium and supermarket.
“Prices would rise to reflect the higher costs. Even the smallest businesses would be hurt as landlords passed the cost of higher taxes through to their tenants.”
National Education Association President Lily Eskelsen Garcia, California Teachers Association President E. Toby Boyd and SEIU California President Bob Schoonover are scheduled to attend Sunday’s signature-gathering event.
Donations on behalf of the initiative have been made by committees affiliated with the Service Employees International Union ($500,000), California Federation of Teachers ($250,000), United Teachers Los Angeles ($50,000) and SEIU Local 215 ($50,000), according to records from the California Secretary of State’s Office.
Chan Zuckerberg Advocacy, the limited liability corporation founded by Facebook founder Mark Zuckerberg and his wife Priscilla Chan, has donated $300,000. The Los Angeles-based charitable organization, the California Community Foundation, has donated $225,000.