Last December, an initiative was circulated for an amendment to Proposition 13. With voters concerned about rising property taxes, Proposition 13 passed in 1978, limiting property taxes to 1% of a property’s value at the time of purchase and mandating a maximum 2% yearly increase. Now the League of Women Voters and multiple nonprofit groups want to modify that law to create a split-roll system.
This proposed split-roll would make it such that the Prop 13 limitations would only apply to residential property, not to commercial or industrial property. Unforeseen by those who drafted Prop 13, commercial and industrial property seldom changes ownership, which resulted in windfall profits from tax avoidance for owners of such property. The changes would have commercial property taxed based on fair market value, with exemptions for small businesses and commercial agricultural property. The proposed amendment would allocate 60% of the revenue to local governments and 40% to schools. This initiative is currently pending official review before it can be added to the November 2018 ballot.
The estimated effect of the amendment ranges from approximately $6 billion to $11 billion of new tax revenue per year, depending on the market that year. Teachers are in favor of the increased funding for schools, especially after Prop 13 moved some funding and control from local school systems to the state government. As expected, business owners and anti-tax groups are opposed. Governor Jerry Brown, who was also governor when he signed the proposition back in 1978, asserts that it’s too late to try to propose a new ballot measure to lower the threshold for more taxes. Proponents, while lacking funding, believe that they have grassroots support.