Prop 13 Overhaul: Signatures gathered to raise property tax on the top 8%
Image source: thebalance.com
Earlier this month, supporters started gathering signatures to increase property taxes on commercial properties in Los Angeles, a measure expected to be on the 2020 ballot.
If passed, 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.
The taxes would only apply to commercial properties worth $3 million or more.
What supporters have dubbed the "Schools and Communities First" initiative would allow for an annual unlimited reassessment of commercial and industrial properties to their fair market values.
This means that billions of dollars could be allocated to schools and local governments, which could actually raise residential property values.
Here's how it would work:
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 market.
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.
Passed by voters in 1978, Prop. 13 capped state taxes for all types of property at 1% of the purchase price, with annual increases of no more than 2%. Critics have long complained that California is losing out on billions of dollars in revenue each year from valuable business properties that have never changed hands and thus never had their taxes reassessed.
The initiative would ask voters to adopt a system known as “split-roll,” under which the annual tax bill for large commercial and industrial buildings and land would be based on their market value.
Supporters will have to collect nearly a million signatures by April 21 to qualify their proposal for the ballot.
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