There's actually a proposal for a ballot measure next year to end Prop 13 for commercial properties -- definitely a start. It would bring $11 billion in revenue every year.
It has been attempted and failed as of 2020[0]. Voters are mostly uninformed. CA voters voted against commercial properties at market rate but further increased family home reassessments.
It would have to be a statewide ballot proposition, and you'd be up against the entire real estate industry, which has large parts of the California State Legislature in its hands. They would spend enormous amounts of money to mis-market it in poor political advertising.
Perversely, two-thirds of the financial benefits of Prop. 13 and its tax freeze went to commercial interests even though it was sold as a way to keep homeowners in their homes. One only-third of its foregone revenues benefit homeowners. A lot of California policymakers have wanted to change this for years, since it really screwed with public school and city finances for decades.
The biggest issue with Prop 13 is the allowance for commercial properties.
Prop 13 for protecting individual residential property owners on a fixed income from escalating "assessed" property values makes a good deal of sense. Especially in a state like California, if left unchecked, would be raising all sorts of taxes and fees for failed experiments.
(Note - born/raised/ life long Bay Area resident)
Prop 13 needs a revision to exempt commercial property...
There a pretty weak reform for 2020 in Proposition 15. It will tax at realistic values (i.e. exempt from Prop 13) certain commercial properties. I'd like to see much stronger reforms so that second homes are realistically taxed etc, but at least it is a start.
In case you were unaware, there were two proposed constitutional amendments that would reduce Proposition 13 benefits this past November:
Proposition 15 (which would have eliminated commercial property tax breaks) failed 48%-52%. I think its biggest political flaw is probably the fact that it would apply July 1, 2022, with no phase-in for small businesses whose lease passes through the property tax. So hopefully in November 2022 another attempt can be made that addresses the political shortcomings.
Proposition 19 (which eliminated tax breaks for inherited investment property in exchange for increased tax portability for the elderly) only barely passed 51%-49%, and that was after it received overwhelming support from the legislature, and a $45 million advertising campaign from the California Association of Realtors that some people criticized for only highlighting the goodies for old people and not the costs for inheritors.
No one is attempting a full repeal of Proposition 13 including residential property.
It could also be attacked judicially; see this episode of the Henry George Program for a discussion of Nordlinger v Hahn and whether different legal arguments could be tried (e.g. does Proposition 13 impinge on the American freedom to migrate under the US Constitution?) http://seethecat.org/ep/2017-07-11.html
>This is because Prop 13 prevents cities from collecting RISING taxes from residential properties (but they can collect rising taxes from commercial properties)
The parenthetical here is incorrect - all property taxes, regardless if they are for residential, commercial, or industrial properties, have capped yearly increases under Prop 13. In 2020, there was a ballot initiative, Prop 15, which proposed a "split roll" to remove the Prop 13 rate caps from certain types of businesses, but it did not pass. You can read more about Prop 15 here: https://ballotpedia.org/California_Proposition_15,_Tax_on_Co...
Few years ago there was a prop to strip prop 13 from commercial properties and fund schools. It was sponsored by the zuck foundation. Even that didn’t pass
I'm quite interested in what your relative thinks might be the impact of the looming property tax reform in CA; if the ballot initiative passes next month then commercial real estate will no longer be able to enjoy the prop13 caps by using pass-through entities to own the buildings, and changing the beneficial owner of the real estate holding corporation instead. Plunging rents plus escalating tax liabilities seem like a perfect financial storm.
This is the real answer in my opinion. Prop 13 does make some sense (especially in its current form now that the other measure passed that limits prop 13 for homeowners over 1 million in value).
But for commercial real estate ? That seems totally ridiculous. There is so much tax that could be collected there!
I voted this year for the amendment to it basically that mainly involved inheritance - I do not have a huge problem with it for the first generation but when you get to things like homes inherited three times over and the grandkids are paying absolutely nothing on a home worth 4 million dollars then it seems totally ridiculous. The amendment though that passed seems to be a nice middle ground (for now)
The real shitty part about prop 13 for me is not the residential tax rates but commercial/industrial - some giant corporation owning a giant warehouse that has an insane value should NOT be paying a super low tax rate.
I wonder if a deal that removes Prop 13 but reduces state income taxes can be put on the ballot. That way you keep overall revenues same, but just change how it is collected.
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