PROP. 15: 90% of Tax Revenue From Top 10% Highest Value Properties

Prop. 15 would remove landmark measure’s tax protections on commercial property.

BY BRIAN HEWS • September 15, 2020

Gov. Gavin Newsom has endorsed a November ballot measure that would make commercial property owners subject to billions of dollars in additional taxes each year.

If approved by voters, Proposition 15 would place different tax rules on commercial and residential property requiring commercial and industrial properties, excluding those zoned as commercial agriculture, to be taxed based on current market value.

Proposition 13, passed in 1978, based the value of all property on what it sold for when last purchased. capping property tax rates at 1% of the assessed value with annual increases of no more than 2%.

Consequently, Californians who hold on to their end up paying significantly less in taxes than those who have bought similar property more recently.

But Prop. 15 would not change the low-tax provisions of Proposition 13 for homeowners and would also exempt some commercial property owners whose properties are valued at $3 million or less.

It has been an intense debate, topped by an estimate by the independent Legislative Analyst’s Office that found Proposition 15 would generate as much as $12.5 billion more in tax revenues per year by 2025.

The winners are most certainly local governments, K-12 schools and community colleges as 60% of the revenues will go to the governments and 40% to the schools, which would be in addition to the current taxes collected.

With organized labor and businesses both for and against the measure, an epic battle is in store; campaign finance records show supporters and opponents have raised a combined $60 million.

The supporters are backed by a report that found that more than 90% of the additional property tax revenue from Proposition 15 would come from just 10% of the highest value properties.

“Nearly 50% of the revenue raised by the measure will come from properties that have not been reassessed since before 2000,” said the authors of the report.

Interviewed by KQED.org, John Kabateck, California director of National Federation of Independent Business (NFIB), which advocates on behalf of small businesses, called the report a “veiled attempt to pull the wool over taxpayers and voters eyes.”

Kabateck said the final version of the measure would still end up harming many small businesses.

“They talk a lot about the exemption and the small businesses aren’t hurt and that they’re really just attacking the big guys, the big corporations,” Kabateck told KQED, “what they fail to mention is that the majority of small business owners, upwards of 80%, rent their property. That cost is passed on directly from property owners.”

The Yes on 15 campaign responds that if a majority of the property is occupied by small businesses, the reassessment would be deferred until 2025-26.

It was also noted that landlords who have benefitted from artificially low property taxes have likely not passed those savings along to their tenants.

In addition to unions, a wide array of Democrats are supporting Prop. 15, including former Vice President Joe Biden, Sen. Kamala Harris and several other former presidential candidates and