(April 16, 2008) Strong opposition from the business community stopped the author of a California Chamber of Commerce-opposed bill from pursuing his legislation examining the amount of revenue that could be generated from imposing a “split roll” tax.

AB 2461 (Davis; D-Los Angeles) ordered the Board of Equalization to conduct a study of the amount of revenue that would be generated if commercial property were reassessed at fair market value versus value locked in because of Proposition 13.

The Calchamber and other business groups took an "oppose unless amended" position on the basis that AB 2461 was an incomplete approach to studying the potential impacts of a "split roll" property tax. To provide a complete analysis of the "split roll" issue, the following additional questions needed to be addressed (which the bill did not include): 

• What would be the impact on local government revenues under a "split roll" property tax system when an economic downturn or recession devalues business property?
• What would be the additional cost for county assessors who would bear the burden of more frequent reassessments under a "split roll" property tax system?
• Would small business bear a disproportionate cost from a property tax increase under a "split roll" system due to pass-through provisions addressing property taxation in many commercial leases?
• If the "split roll" had a disproportionate impact on small businesses, would it likewise place a disproportionate burden on women- and minority-owned businesses?
• What effect would increased property taxes for businesses have on the value of California public employee pension funds?
• What would be the dynamic “spin-off” effects of higher business property taxes on consumers?
• What would be the dynamic “spin-off” effects of higher business property taxes on the unemployment rate?

The CalChamber and other business groups believe that without asking the above questions, a study to examine the potential impacts of split roll will be incomplete and likely lead to an inaccurate analysis on which to base sound public policy decisions. 

Adverse Effects

A “split roll” tax would undermine the intent of the protections cemented in Proposition 13 and have a negative impact on job-producing operations and the state’s well-regarded property tax structure.

Commercial properties already contribute significant tax dollars -- generating approximately two-thirds of the property tax revenues, just as they did before the passage of Proposition 13. Implementation of a “split roll” tax would mean tax increases for California businesses likely to exceed $3 billion per year.

Increasing commercial property taxes will not occur in a vacuum -- it will harm not only businesses, but also their ability to provide jobs, benefits and cost savings to tenants and customers. Consumer costs could increase as a result of the increased cost of doing business.

Staff Contact: Kyla Christoffersen

Additional Materials

Taxation