Californians are currently gathering signatures for a 2020 ballot initiative that would drastically change Proposition 13, the 1978 initiative that capped the maximum amount of any ad valorem tax on property at one percent of the property's cash value. That tax is collected by the county and used for various government services, like schools.
Proposition 13 was originally passed because property values continually skyrocketed, meaning homeowners' property taxes were also increasing. Those on limited incomes, like senior citizens and the retired, were being taxed out of their homes. The initiative was a way of protecting them.
From The Los Angeles Times:
Under the proposed initiative, county assessors would split their tax rolls into two lists. Homeowners and some small businesses would still receive the full Proposition 13 benefits: a 1% tax based on a property’s purchase value and annual tax increases of no more than 2%.
But commercial and industrial property owners would be required to pay more. While their tax rates wouldn’t change, beginning in 2022 the levy would be based on the current market value of the real estate. Business property values would have to be updated by county assessors at least every three years.
The change has been championed by various liberal groups, including Service Employees International Union (SEIU), the California Teachers Association and the California Federation of Teachers.
Other prominent figures, such as Facebook founder Mark Zuckerberg, his wife Priscilla Chan and 2020 Democratic candidates Sens. Kamala Harris (CA), Elizabeth Warren (MA) and Bernie Sanders (I-VT) have thrown their support behind the initiative.
A corporate tax loophole has allowed billions to be drained from our public schools & local communities to benefit wealthy investors. No more.
— Kamala Harris (@KamalaHarris) October 3, 2019
Proud to support @seiucalifornia and @WeAreCTA's efforts to close this loophole & restore over $11B to put #SchoolsAndCommunitiesFirst.
Businesses, however, are increasingly worried about this proposed tax change.
"When I talk to my members, small, medium and large, this is the No. 1 issue that scares them," Rachel Michelin, president of the California Retailers Association, told the Sacramento Bee. "They are terrified about the split roll initiative, they are terrified about what it will do to their bottom line."
Small businesses would suffer despite the so-called "protections" laid out for them in the initiative. Because most small businesses rent, their commercial landlords will pass the tax increase off to their tenants.
“What that translates into is higher prices for consumers and brick and mortar stores,” California Taxpayers Association President Rob Gutierrez explained. “Dry cleaners, grocers, companies that cannot move, will have to find a way to pass these costs on.”
According to the Legislative Analyst’s Office, the initiative, if passed, would generate between $7.5 billion and $12 billion annually.
California is already unfriendly to businesses. This is just another nail in the coffin and another reason for business owners to flock to states that actually want business. It's why red states, like Arizona and Texas, have launched campaigns aimed at attracting ex-Californians. In fact, Texas recently celebrated Apple and Toyota relocating their headquarters to the Lone Star State. Amazon, Acronis, Valor Global and TEKsystems have all announced expansions in Arizona because of its business-friendly climate.
