Facing long political odds, state Sens. Loni Hancock and Holly Mitchell introduced a constitutional amendment Wednesday to overhaul portions of Proposition 13, California’s landmark tax-limiting measure.
Under current law, property tax reassessments occur only after changes in ownership or new construction. SCA 5 would introduce annual assessments of commercial and industrial properties to more closely tie their tax rates to current market value.
Mitchell, D-Los Angeles, said the proposal is targeted at the largest corporations and property owners, many of whom have avoided reassessment in the nearly four decades since voters passed Proposition 13, sometimes by taking advantage of loopholes in the law. Homeowners and agricultural properties are exempted from SCA 5, which also includes a tax break for small businesses.
“What we are looking to do is to take those few that are benefiting from under-assessment and bring them in line with everyone else,” Mitchell said.
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Hancock, D-Berkeley, called it a revenue and ethical issue. The proposed changes could generate an additional $9 billion annually for local governments and schools, she said, which would help the state avoid another fiscal crisis when the temporary Proposition 30 taxes run out in the next few years. But businesses should also pay their fair share of the public services that all Californians rely on, she added.
“The responsibility for the things we all need and use is falling on our families,” Hancock said. “This is pure tax avoidance.”
With a two-thirds vote – meaning some Republican votes – required in both houses of the Legislature, it will be a significant challenge to get SCA 5 on the 2016 ballot. Hancock and Mitchell said they want to use the legislative process to refine their proposal and build public support for amending Proposition 13.
But they’ve also partnered with Make It Fair, a coalition of unions and other liberal groups, which could pursue a ballot initiative next year.
If the Legislature doesn’t approve the bill, Hancock said, “I think we ought to take it directly to the people.”
Outside the news conference, anti-tax advocates disputed Hancock’s assertion that homeowners are burdened by an increasing share of property taxes, and said raising taxes on businesses could cost the state hundreds of thousands of jobs.
Tax revenue is already surging in California, added David Kline of the California Taxpayers Association. “It boggles the mind that someone would suggest another $9 billion on top that windfall.”