Californians are paying more than $1.9 billion per year in parcel taxes, yet this form of property taxation continues to fly under the radar, with little transparency or accountability for how the money is spent.
Last year, the California Tax Foundation began researching two simple questions: How many local governments in California impose parcel taxes? And would it be possible to compile all parcel tax information into a single, comprehensive document that could shed some light on this mysterious tax?
We quickly discovered that local governments are not eager to share information about the parcel taxes they impose. We were forced to file hundreds of Public Records Act requests to gather the information. Some local governments never responded, while others gave only partial information and said many of the documents we wanted are unavailable.
To their credit, some local governments responded in a timely manner, with complete information.
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Our digging resulted in the collection of more than 11,500 files relating to parcel taxes. We distilled this information into a just-released, easy-to-read report called “Piecing Together California’s Parcel Taxes – An In-Depth Survey of Local Special Taxes on Property” (available at www.caltaxfoundation.org/reports/parceltax-fullreport.pdf). We also made all of the source documents available online at a new site for the Center for Special Taxes.
What does the data show?
In addition to revealing that Californians pay more than $1.9 billion a year in parcel taxes, the documents exposed many problems with the parcel tax structure.
Most notably, the tax varies dramatically from area to area, with vastly different rates, definitions and structures. In some areas, the tax on one parcel may be hundreds of dollars a year, while the tax on a nearby parcel is thousands of dollars a year, simply because local officials wanted to target a specific property owner with higher taxes.
In the city of Davis, the parcel tax on industrial properties is based in part on the number of people employed by the owner – a factor that has absolutely no place in a tax on property.
Many taxes are based on complicated formulas that consider “single-family equivalents” or “benefit units,” with definitions that the average property owner will have trouble understanding or challenging.
About 26 percent of the parcel taxes in California do not have a sunset date, so they will be imposed indefinitely – and many of these are increased annually for inflation, so they keep going up, up, up.
In short, the current parcel tax system can leave property owners feeling like they’re in the Wild West, where anything goes.
Our report makes several recommendations, including:
▪ Improve transparency: Require that property tax bills include information about the amount of every parcel tax, when the tax expires, whom to contact with questions and more.
▪ Provide consistency: The Legislature should equalize parcel tax rates by adopting a uniform rate structure that local governments would have to follow, modeled after the successful Bradley-Burns Uniform Local Sales and Use Tax Law.
▪ Make tax votes fairer: Require that ballot titles and summaries for parcel tax measures be written by independent bodies, so ballot materials no longer would be written by the very people who placed the measure on the ballot.
We hope that our report and its recommendations for common-sense reforms lead to more public awareness about parcel taxes, and also to the creation of an orderly, fair system for all taxpayers.
Robert Gutierrez is director of the California Tax Foundation, the research arm of the California Taxpayers Association.