Signature gatherers are coming to a grocery store near you armed with petitions to put an initiative on the 2020 ballot that would change property tax law in California.
Supporters, including top Democratic presidential candidates and labor unions, say it will make big corporations pay their fair share to help fund schools and local services. Opponents, mostly business interests, argue raising taxes on them will drive up prices for everyone.
Here’s what you need to know about the new initiative proposal:
What would the ‘split roll’ initiative do?
The proposed ballot measure aims to charge big businesses more in property taxes. Right now, California taxes all property based on its purchase value, with increases over time to account for inflation and reassessments when a building is renovated.
The proposed initiative would tax commercial properties worth more than $3 million based on current assessed value. That would require local governments to assess business property periodically and split their tax rolls between those taxed based on current value and those still taxed on purchase value.
Property tax rates would remain at 1 percent.
The measure exempts residential and agricultural property, and delays implementation for properties that are mostly rented out to small businesses. The measure would also end taxes on personal property, such as equipment and furniture, for businesses with fewer than 50 employees to insulate small businesses from rising costs. It would also exempt up to $500,000 worth of personal property from taxation for larger businesses.
The Legislative Analyst’s Office estimates the measure would generate between $7.5 billion and $12 billion annually for schools and local governments.
Mark Zuckerberg, Bernie Sanders support it
California’s teachers unions and the Service Employees International Union have thrown their weight behind the measure. To date, Facebook founder Mark Zuckerberg and his wife Priscilla Chan’s philanthropic arm, the Chan Zuckerberg Initiative, is the campaign’s largest donor.
A handful of top Democratic presidential candidates have also endorsed the measure, including California Sen. Kamala Harris, Massachusetts Sen. Elizabeth Warren and Vermont Sen. Bernie Sanders.
“A corporate tax loophole has allowed billions to be drained from our public schools & local communities to benefit wealthy investors. No more,” Harris tweeted earlier this month, mentioning SEIU and the California Teachers Association. “Proud to support @seiucalifornia and @WeAreCTA’s efforts to close this loophole.”
Tyler Law, a spokesman for the initiative, said the current law benefits older businesses over newer ones and that bought their property more recently. The initiative will level the playing field, he said, and raise money for schools and local services like firefighters and police.
“Most of us all want similar things, good schools for our children, safe neighborhoods, and yet for many decades wealthy investors in big corporations have not been paying their fair share,” Law said. “This initiative closes that corporate loophole.”
Business groups, retailers oppose it
Groups representing businesses and property owners are driving the opposition to the measure, which they see as a big threat to their profits.
“When I talk to my members, small, medium and large, this is the No. 1 issue that scares them,” said Rachel Michelin, president of the California Retailers Association. “They are terrified about the split roll initiative, they are terrified about what it will do to their bottom line.”
California Taxpayers Association President Rob Gutierrez argues the protections for small businesses aren’t strong enough. Because many small businesses are renters, higher property taxes on the buildings they rent space in will result in more expensive rent for them, he said.
“What that translates into is higher prices for consumers and brick and mortar stores,” he said. “Dry cleaners, grocers, companies that cannot move, will have to find a way to pass these costs on.”
Opponents characterize the measure as an attack on Proposition 13 of 1978, which created California’s current property tax rules to keep property taxes low for both businesses and residents. The proposed initiative would only change parts of Proposition 13 applying to businesses, not residential property, but opponents are highlighting the law’s residential property tax protections.
California Business Roundtable President Rob Lapsley says his group is funding a multi-million dollar effort to convince Californians to defend Proposition 13. Many of the group’s talking points and materials focus on residential property tax rates. They’re building an email list of Californians who say they support the current law, Lapsley said.
That effort isn’t currently registered to campaign against the split roll proposal, but if the measure makes it to the ballot, Lapsley said they’ll train their sights on defeating it. The Business Roundtable is also a major donor to the official campaign against the measure.
When can I vote on the proposed initiative?
Backers of the split roll proposal were cleared to begin gathering signatures last week. They have 180 days to collect nearly 1 million signatures from supporters to place the measure on the November 2020 ballot.