The Skinny on Prop 15
his November, Californians will vote about whether to close a property tax loophole that favors older commercial properties. Residential property tax is based on the property’s last sale price, not current market value, but that is not true for commercial property. Even if the market value of commercial property increases, and a sale price reflects that, the property’s tax bill does not change if less than half of the property changes hands.
So when Michael Dell (of Dell Computers) buys a Santa Monica hotel, splitting ownership between himself, his wife and a corporation he owns, the property tax doesn’t change–the hotel is, in effect, still taxed at 1978 rates. Commercial properties throughout the state use this dodge to deprive us all of an estimated $12 billion in public money.
Passing proposition 15 puts California on par with the way the vast majority of states treat commercial property.
Since 1978–when prop 13 passed, implementing this loophole–California schools have gone from 21st to 46th in spending per student. The condition of California bridges ranks 18th nationally, and half of its county hospitals have closed. Homeowners pay a bigger share of property tax revenues, too. In 1978, corporations paid 44% of property tax. Currently, they pay 28%, with homeowners paying the rest.
Proposition 15 remedies this by assessing commercial properties at current market value (“split roll”). It also exempts owner-operated small businesses from reassessment until they are sold. It levels the playing field so small businesses can compete more fairly with big CONTINUE READING: The Skinny on Prop 15 - LA Progressive