(June 20, 2003) - The California Chamber is fighting an attempt to increase business property taxes through a “split roll” constitutional amendment that removes Proposition 13 protections for non-residential property.
The Chamber-opposed “job killer” bill proposing the change, ACA 16 (Hancock; D-Berkeley), is scheduled for a hearing on June 23 in the Assembly Revenue and Taxation Committee.
If ACA 16 becomes law, business property owners will be subject to the strong inflationary pressures that spawned skyrocketing property taxes and fueled 65 percent voter support for Proposition 13 in 1978.
By changing the definition of “full cash value,” ACA 16 will in effect extract more money from employers to pay for out-of-control government spending, making employers less competitive, taking resources from consumers and discouraging business investment in real property.
The job loss and negative impact on California’s economy would be significant. Real estate investors would suffer losses comparable to the recent fall of the technology sector.
Current Protections
Proposition 13 set up a system in which property is assessed at its value when there is a change of ownership or new construction. Annual increases in the taxable value of the property are limited to the rate of inflation or 2 percent, whichever is less.
The system has helped calm property tax levels for both residential and commercial property owners, and is one of the positive features of California taxes.
It should be noted that business already pays nearly two-thirds of the property tax, a share of the burden that has remained relatively stable since Proposition 13 went into effect.
In addition, many businesses are subject to regular reassessments. Properties regulated by the Public Utilities Commission (such as a regulated telephone company), already are reassessed to full market value yearly. Business facility improvements add assessed value when completed. When one business purchases another company, the real property of the purchased business is reassessed to full market value, thus generating greater property taxes.
Small Business Impact
The Chamber believes ACA 16 will create particular difficulties for small businesses that won’t necessarily have the ability to pay higher taxes or a more expensive lease just because inflation has increased the value of the property.
California businesses already are being hit with higher costs in workers’ compensation, health care and energy. If property taxes also go up because of ACA 16, businesses won’t necessarily be able to pass on the higher tax costs through higher prices or lower wages or benefits for employees. The added cost could mean the difference between staying in business or closing, or between expanding the business and jobs or laying off workers.
The Chamber is urging legislators to oppose ACA 16. If it becomes law, it will hurt businesses already operating here and give others a reason to invest or expand outside of California.
Staff Contact: Dominic DiMare