Budget/Taxation

Overview

Proposition 13 was approved by the voters in 1978 to provide stability among property owners with regard to tax increases. At the time, the demand for homes was high and inflation rampant, thereby increasing the value of property. The higher property values led to reassessments of the taxes owed based upon the current market value, which dramatically drove up the property taxes for everyone, including homeowners who had been in their homes for many years and could not keep up with the rising taxes.

Proposition 13 resolved this problem by capping property tax rates for both residential and commercial properties at 1% of their assessed value. It also prevented a property’s assessed value from growing more than 2% a year. Generally, the value of residential or commercial property may be reassessed at a rate higher than 2% only when there is a change of ownership or new construction. Taxation

Related Business Issues:
Prudent Budget Proposed by Governor for 2014-15
Turning Recovery into Prosperity

Goals

  • Monitor legislation and regulatory activity to ensure that California tax laws are fair and can be administered easily.
  • Review state spending plans to make certain that economy and efficiency are the primary goals of government.

Major Victories

Stopping Hidden Taxes. Sponsored the 2010 winning campaign for Proposition 26, clearly defining fees and taxes at the state and local levels so that governments can’t pass real taxes with a simple majority vote. 

Stopping Multiple Tax Proposals

  • Blocked barriers to economic recovery in 2013, such as a split roll parcel tax that would have permitted school districts to assess commercial property at a higher rate than residential property
    (AB 59); and a split roll change of ownership bill that would have led to more frequent reassessment of commercial property (AB 188); and in 2012, a proposal creating inappropriate wage liens (AB 2517), and a plan to repeal the net operating loss (NOL) carry back deduction (AB 2408).
  • Blocking new barriers to economic development in 2011, such as a proposal requiring tax credits to sunset (SB 508); a “split roll” property tax (AB 448); and a multitude of hidden and specific tax hike proposals (AB 832, AB 1130, AB 1239, SB 237, SB 535, SB 653, SBX1 23); and 2010 proposals such as tax hikes on companies that invest in property and jobs (AB 1935, SBX6 18), targeted tax increases (AB 2100, SB 1210, ACA 22), and proposals creating uncertainty about the future availability of investment-encouraging tax credits (AB 2171, AB 2641, ACA 6, SB 1272, SB 1391, SBX6 20).

  • Aggressive campaigning and advocacy by CalChamber-led coalitions in 2009 dampened enthusiasm for tax increases and new taxes, including targeted tax increases that would have exacerbated state budget problems and hurt the targeted industries; a “split roll” proposal to tax business properties at a higher rate; an energy tax that raises the price of gasoline and California-produced crude oil; and an onerous new requirement for business and government to withhold taxes on payments to independent contractors.

  • Block legislation levying a climate change tax increase in 2009 (AB 231, AB 1405, SB 31)

Improving Tax Process

  • Won approval in 2013 of two job creator bills that help resolve critical problems for small business and small business investors: protecting small businesses from drive-by Proposition 65 lawsuits by providing a 14-day right to cure for allegations of failure to post required warnings (AB 227); and created a dependable tax environment by repealing the Franchise Tax Board decision to retroactively tax small business investors who relied in good faith on the law when investing in California and using a taxincentive that subsequently was found unconstitutional (AB 1412).
  • Supported proposal in 2010, reducing complexity and waste in tax reporting and administration by conforming many California tax provisions to recent changes in federal tax law, including a conformity provision giving financial relief to troubled borrowers by excluding debt forgiven by a lender from a borrower’s taxable income (SB 401).

  • Backed urgency legislation in 2009 improving taxpayer confidentiality (AB 192), reducing administrative delays in the reassessment process (SB 816) and simplifying sales tax compliance for non-profits (AB 1486).

Promoting E-Commerce

  • Stalled proposals in 2009 harming California online marketplaces, web-service providers, and websites of small businesses and non-profits by changing California’s sales tax law in a way that will encourage out-of-state retailers to instead do business with out-of-state counterparts (AB 178, ABX3 27).

Position

The CalChamber has opposed and will continue to oppose tax increases that are targeted at one industry, seek to discriminate against businesses, or are punitive in nature. We are willing to engage in a discussion regarding tax increases when it is necessary and fair. For example, the CalChamber had no position on Proposition 30, which passed on the November 2012 ballot, and actually supported the temporary tax increases that were proposed as part of the budget negotiations in 2009.

Issue Summary

Targeted Taxes/Targeted Credits
Position: The California Chamber of Commerce supports a balanced, nondiscriminatory tax system that does not penalize any one industry. State programs that benefit the general public should be paid for by the general public. Similarly, although the CalChamber supports any type of tax credit that incentivizes growth in any industry, we encourage more broad-based tax credits that will promote job growth in all industries throughout California. Targeted Taxes/Targeted Credits 

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