By Jim Miller
By now you’ve seen them all: the litany of ads and mailers against Proposition 15 featuring worried small business owners, angst-filled barbers, and other advocates for hire trying to scare you that Proposition 15 is aimed at small businesses. You’ve even seen a handful of craven local politicians parroting corporate talking points and throwing their communities under the bus in an effort to court the Chamber of Commerce set during campaign season by opposing a measure that would bring billions of dollars into education and vital social services.
What does Proposition 15 actually do? It will require that commercial property valued at more than $3 million be reassessed at fair market value every three years.
- This closes a loophole that large corporations have used for decades to avoid paying their fair share of property taxes.
- The richest 10% of corporate properties will provide 92% of the revenue.
- Prop 15 specifically exempts all residential properties and agricultural land, maintaining full Prop 13 protections for homeowners, renters, and agriculture.
Thus, as I noted in an earlier column on this measure, it’s simply false to say that it will afflict the local Mom and Pop shop or pizza spot.
Why the lie then?
As Bobbi Murry recently observed in “Cash of the Titans: Prop 15’s Big Spending Opposition” in Capital and Main :
Optics are everything in politics, and if you’re a big business interest with a stake in a ballot initiative fight in California, it’s always better to look like the Little Guy – i.e., the corner hardware store or a local homeowner. You definitely don’t want to look like the Big Guy—like, say, BNSF Railway, one of the largest freight lines in North America, or the Irvine Company, which is wholly owned by Donald Bren, whom Forbes deemed to be one of the world’s wealthiest people.
BNSF and Irvine Company are only two among the many corporate interests that own thousands of acres of land in California that are taxed at rates set in the 1970s. Not surprisingly, they are among the entities that have flooded serious money into the fight against Proposition 15, the Schools and Communities First initiative, a November ballot measure that could change their tax assessment structure and cost them millions more yearly.
Michael Hiltzik further documents where the money behind the “No on 15” side is coming from in his recent LA Times column “Who’s Opposing Proposition 15? Land Developers and Big Business” noting that:
According to the most recent disclosures filed with state campaign finance authorities, the big spenders on the “No on 15″ side include land developers, agricultural interests and golf and country clubs.
All told, they and other opponents have assembled a war chest of more than $20 million to fight the measure.
This shouldn’t be surprising, because those are among the business interests that have benefited handsomely from the obstacles to reassessing commercial and industrial properties built into Proposition 13.
Hence, it’s clear that large corporate interests are smart enough to know that nobody will feel sorry for them if they openly complain about losing a tax loophole, so they are using small businesses and homeowners as human shields in their efforts to protect their interests. Forget the fact that the economic elite have done obscenely well over the course of the pandemic while ordinary Americans suffered, that’s just not good political marketing. It’s simply more effective for them to hide behind the mythical barbershop owner rather than openly complain about having to pay more for their country clubs.
A Billionaire FOR Closing Corporate Tax Loopholes?
Enraging some of his fellow billionaires, Mark Zuckerberg and his wife Chan have broken ranks and their philanthropic group is helping to fund the Yes on 15 campaign along with labor and community groups because, as they put it, “We’ve seen decades of disinvestment in local communities in California, and now with Covid-19, we’re seeing schools struggling, hospitals and clinics struggling, and local services struggling even more deeply. This proposition is a major opportunity to unlock a stable stream of resources for our communities that need it most.”
So far, they are one of the only notable exceptions of California’s business sector to recognize that having a secure revenue source for education and social services is actually better for commerce than deepening inequality and austerity. Go figure.
What’s Up with the Commercial Against Prop 15 using the NAACP?
One of the most galling aspects of the No on 15 campaign is that it has enlisted the NAACP’s Alice Huffman as a hired gun. As Cal Matters reported:
Huffman’s political consulting firm has been paid more than $1.2 million so far this year by ballot measure campaigns that she or the California NAACP has endorsed. She’s been paid by campaigns funded by commercial property owners fighting the tax increase, corporate landlords opposed to expanding rent control and bail bondsmen who want to keep the cash bail system . . .
Though Huffman spent much of her career with the teachers union, her consulting work now consists largely of helping corporate campaigns that are fighting against organized labor. Unions are against changing the labor law with Prop. 22, and for raising commercial property taxes with Prop. 15, adding new requirements on dialysis clinics with Prop. 23 and ending cash bail with Prop. 25.
This has not gone down well in activist circles with, as Cal Matters notes, many people in the African American community criticizing Huffman’s use of her position:
“I feel like it’s a conflict of interest and I think it’s misleading to the public,” said Carroll Fife, an officer of the Oakland chapter of the NAACP who disagrees with the state organization on several ballot measure endorsements. “It’s unfortunate. Politics is gross.” . . .
“She has the right to make money as we all do,” said Anthony Thigpenn, a community organizer in Los Angeles who heads the California Calls advocacy group and supports Prop. 15. “But when it’s something that’s using a community-based organization’s brand, and particularly when it’s taking positions… that are not in the interest of the communities that organization has advocated for and championed, that is disappointing and sad.”
Thigpenn said he believes increasing commercial property taxes with the so-called “split-roll” approach in Prop. 15 is a matter of racial justice.
“Black communities in California suffer most from the lack of funding for schools and community colleges, which are typically gateways for people to have career paths and livable wages and good jobs,” he said.
Thus, unfortunately, the Huffman commercials represent nothing more than a royal sell-out by a leader peddling corporate lies and using her position to cash in on an election cycle bonanza. Et tu, Alice? Apparently so.
The Big Picture: Why Proposition 15 Really Matters
In the end, Proposition 15 matters not just because it will bring in much needed revenue to help fund a just recovery and the future of our state, but because it is part of a larger social justice movement that directly deals with the issue of economic inequality and its myriad negative effects.
As Fred Glass puts it in Jacobin :
Progressive tax policy. Though variable in form, fundamentally it is a way to redistribute society’s wealth more equitably. In this instance, Prop 15 proposes to remove one hated cornerstone of the early neoliberal policy edifice in California: it closes a corporate tax loophole that robs billions of dollars a year from schools and social services. The measure has been anticipated since 1978 by everyone who understood how badly that year’s Proposition 13 crippled the Golden State’s tax structure.
In nearly every other state, commercial property assessment is conducted on the basis of current market value. Yet in California, the tax paid by commercial property owners is 1 percent of its purchase price, no matter how long ago that transaction occurred or how much the property has appreciated since.
With an inflation factor capped at 2 percent per year, large corporations like Disney and Chevron underpay current market valuations by tens of millions each year. In a non-pandemic year, Prop 15 would raise ten to twelve billion dollars, or roughly 5 to 6 percent of the state’s pre-pandemic budget . . .
It will be a concrete reform on behalf of the California working class, manifested in modest improvements in the daily lives of millions of students and other recipients of public services: transit riders, health clinic patients, parents who need childcare, and people who lack adequate firefighting services within the expanding perimeter of climate change–induced wildfires.
So, please, dear reader, don’t let the negative ads distract you. A yes vote for Proposition 15 is a vote for a just recovery and social justice in California. It will not hurt the ordinary Californians that the corporate-funded ad campaigns say it will. They are trying to fool you because they know if you see the issue clearly, you’ll understand that this reasonable reform closes a corporate tax loophole for folks who don’t need it in the service of the greater good for all Californians.
{ 28 comments… read them below or add one }
Maybe the author of this doesn’t realize that the vast majority of small businesses are locked into NNN leases. We are responsible for paying the landlords property taxes, insurance, and common area maintenance. So we this “loophole” disappears, yes, we as small business owners get stuck paying for those increases. The landlord has no liability unless we can’t pay our bills.
Yes, that’s quite true, particularly among retail tenants. It is also a slippery slope toward overturning Prop 13 for residential properties as well.
I own a small business, and do not have a “NNN” commercial lease on my office space, nor did I see very many of them when I was looking for office space.
Here’s an experiment, search craigslist for 1000-2000 SF commercial space, and $500-3000 price range.
https://sandiego.craigslist.org/search/off?min_price=500&max_price=3000&minSqft=1000&maxSqft=2000&availabilityMode=0
Zero of the first results say anything about NNN.
How about specifically searching for “NNN?”
https://sandiego.craigslist.org/search/off?query=nnn&min_price=500&max_price=3000&minSqft=1000&maxSqft=2000&availabilityMode=0
That drops the results from 93 to 6. And most of the 6 say “no NNN.”
Finally, I see just one single listing that mentions NNN.
There’s a good reason for this. If you sign a lease with NNN, and the building changes owners, you could suddenly have to pay an unknown amount of higher monthly rent.
The only markets where NNN leases are standard are big commercial leases, like a large suburban Starbucks drivethru or a big full floor downtown office suite.
I know both commercial landlords and tenants. Right now commercial rents are going DOWN and FAST.
Okay, at the risk of getting flamed I will add my two cents. When I think about prop 13 at the time of its passage, it’s big selling point was that inflation and increases in property taxes resulting from it were forcing the elderly from their homes. The solution, which was not universally favored by business interests, chambers of commerce, etc., was to cap assessments and allow only a small increase year over year, with major increases occurring when a property is sold. . Now here we are roughly 45 years later and it is clear that the original intent is no longer valid or meaningful. We “elderly” are sitting on huge increases in home equity and are staying in our homes, keeping the market less fluid and denying the young families out there the same opportunities we had for home ownership. Given the ability to pass along our lowered tax to our children, Prop 13 increasingly is acting as a means of perpetuating multi-generational wealth transfer, not protecting those seniors threatened with tax seizures.
Look at it this way. If my neighbor sells her home to a young family, their tax bill will probably be multiples of what I pay, even if my home has had improvements that increase its assessment. How fair is this? Also, remember that the situation has changed dramatically since the passage of Prop 13. Seniors as a group have the greatest wealth of any generation. I’m sure that there are seniors facing foreclosure, but the threat of mass foreclosures are really faced now by the young.
I’m very sympathetic to small business owners who will likely face rent increases, but there are so many inequities that Prop 13 caused that need to be addressed at some point. Given the economic impact of the pandemic, now may not be the time, but it is clear that the split tax role has to end at some point.
One final thought that I read elsewhere. A one day ticket to Disneyland cost about $5.25 at the time of Prop 13 passage. A ticket today costs between $104 and $154 per day, depending on the day. The basis for the tax assessment on the real estate under Disneyland is the same as at the time of passage of Prop 13 with the small incremental increases added each year allowed under the law. How is this fair?
Paul I agree 100%!
A complete repeal of Prop 13 would be ideal, but there’s just no defense to having the Irvine Company, owned by a billionaire, pay a lower property tax rate than a working class person buying a 500sf condo .
In all candor, I think using Craig’s list as evidence that triple net leases are uncommon is not ridiculous. Try calling a broker for restaurant space, significant commercial space or medium size office space. In my experience with commercial leasing, it is essentially standard.
Delete the “not” in front of ridiculous. Auto correct knows better than I do what I want to write.
If we taxed the intellectual property of Apple, Amazon or Facebook (whose founder’s wife Priscilla Chan is the main backer of Prop 15) the same way they want to tax my neighborhood barber, the incremental tax revenue from just one of these tech companies would almost equal the incremental tax revenue from all brick and mortar businesses statewide. The taxing paradigm is stuck in the 20th century and needs to be revisited to address the fact that intellectual/virtual property is as real as (and substantially more valuable than) the buildings in our cities. While brick and mortar/main street businesses – that are the lifeblood of city revenue streams- are declaring bankruptcy and hitting 52-week lows in record numbers, tech companies are hitting all-time highs and are getting through covid unscathed. If amazon or facebook directly competes with our community’s businesses, why should they not contribute in kind to our communities? Why should my barber contribute via property taxes to local schools when companies that employ a city size of telecommuting software developers don’t have this burden. Shouldn’t this be the opposite? Shouldn’t those who derived the most success from school contribute the most? In a zero-sum game, the more sales that occur online in virtual marketplaces, the less sales that occur at the community level, the less revenue for communities and the larger the plug for the revenue loss. To keep increasing taxes and squeezing local businesses puts brick and mortar businesses at a larger competitive disadvantage and only perpetuates this death spiral. It’s time we look at the ones pointing the finger, clamoring for “fair taxes” and consider applying the tax fairly on the digital infrastructure they created.
I support it in concept, except that it’s like giving blank checks to junkies… our political establishment that will undoubtedly piss it away with little to show for it.
I’d rather see the burden shift by decreasing the burden on first home purchasers and business property owners, while raising it on the rest. But who am I kidding, taxes never go down in Taxifornia. Frankly I’m amazed anyone bothers doing business in this state.
Businesses don’t pay property taxes, their customers do. Apartment owners don’t pay property taxes, their tenants do.
If Prop 15 passes, the increased tax burden will be passed onto you, the consumer or apartment tenant in the form of higher prices. Your hard earned money will be sent to Sacramento to be frittered away by politicians.
It’s that simple.
Haha, do you think residential or commercial landlords sitting on tens of hundreds of millions of prop-13 assesses properties are charging their tenants anything more or less than market rate?
Why should a new homeowner or retail owner be burdened with paying up to 10x the property tax as their neighbors?
Prop 13 keeps first new owners out of the market. It had good intentions but it has become a tool to further divide the haves and have nots.
So the Irvine company is charging tenants less than it can get away with, but will suddenly jack rent up if its property taxes increase? That’s pretty amazing, since property tax increases are limited to 2%, rent never goes up more than that?
Notice arguments again taxing rich owners of commercial property who currently pay lower rates than nearly all small homeowners can be used against any and all tax increases on the rich.
Don’t raise Bill Gates’s taxes, it is Microsoft employees and customers who suffer, right?
When Trump passed a massive tax cut for the rich, did you notice rich people passing things on in cheaper products, services, or rent? I didn’t.
Really, “Will” and “Harry” are saying the billionaires opposing Prop 15 are stupid. Why are they spending millions opposing it if they won’t be the ones paying it because it will all be paid by their tenants?
Market rate? Who says? When property is so ridiculous overpriced? The term ‘market rate’ sounds like the same lie as ‘free trade’ that is nothing more than actually corporate trade, a giveaway to the wealthy. Why is my dad’s house in University City, bought for $22,000 in 1970 which was sold after he died in 1994 for $165,000 without a single improvement, and now…what’s it worth I wonder? A million bucks?
That’s absurd! Just so some greedy real estate pricks can buy & flip houses over and over and over raising everybody’s property taxes ever higher and forcing those ‘first-time buyers’ to pay insanely high prices for a home that is no different than when it was built in the 1960s thereby putting themselves in debt to Big Banks that gladly accept the increases to their profit statements like a Mafia loan shark? So the city and county can gouge ever-more taxes from people whose wages have been stagnant since the 1970s especially when compared to the inflation rates of living in this country? Cars that used to cost $6,000 new are now going for $40,000?
Madness! It’s why we voted in Prop 13 in the first place. Saying it ‘keeps first new owners out of the market’ is total crap. The PRICES of housing and stagnant wages and the ever-increasing cost of everything do that quite well without blaming Prop 13… Last I read if minimum wage was pegged to the cost of living, it would be, at a minimum, $22.50 an hour. And we pay so many taxes already, in every single direction one can think of and many we don’t really think about, and all of it is designed to create those haves and have nots with most of the real profits going to the former.
Here’s another question nobody has asked. Just where are all the ‘old people’ gonna go when they get forced out of the homes they bought decades ago due to massive increases in property taxes when Prop 13 gets shut down? Fixed incomes, SS or pensions (remember those?) don’t do well with increasing property taxes (or any other taxes for that matter). More old people on the street perhaps? But of course if they can’t make the money to pay their property taxes they must deserve to be tossed out.
How about rising property taxes only on business properties and multiple & corporate properties owners and NOT on folks who live in single family residences? Isn’t that was Prop 13 was all about in the first place? So fix it don’t get rid of it!
sealintheSelkirks
Seal,
For starters, your last paragraph is the argument in favor of Prop 15 on the current ballot. Split the tax roles so that commercial and industrial properties are not subject to the same rules as residential. So I guess you are in favor of Prop 15.
One of the points you make is that existing property values are too high. Part of this is just inflation. You mention that in the 70’s you could buy a car for $6K, which I think is actually a little high. But I also remember getting my first full-time permanent job in the late mid to late 70’s earning a princely $700 per month and thinking that I was living the dream. I had a beat up but running Westfalia and rented a half of a duplex at the beach. Man, I was living. (by the way, I ran into a German man in the Sierras a few years ago; he brought into the U.S. the modern equivalent of the Westfalia, known as the “California” and he had to post a $100K bond to insure that he took it out of the country when he left!).
But inflation is only part of the picture. The other part is supply and demand – there is simply not enough housing, particularly at the low end of the market, to meet existing demand. Developers and their political shills say that there hasn’t been enough building to keep up with demand, but that is only a part of it. The building has been for the high end of the market, which ultimately “trickles down” to the lower end. This has been housing policy in this country since shortly after the end of WWII.
Supply is also affected by the fact that we seniors are stubbornly staying in our homes! You know, I look around and think “where am I going to move if I sell my home?” If I move to a new community, I’ll probably have an HOA fee and and possibly a Mello-Roos as well. If I move to an older home, I’ll probably end up settling for less. Because I’m older, I have some protections against a stepped up tax bill, but still it will probably go up. So I stay where I am and that means one less unit on the market a young family could possibly move into. Multiply me by thousands, and you have something that ends up driving the market up.
Sounds like Seal and I are almost on the same page as to the failures of Prop 13.
I mainly feel we should not be giving incentives to 2nd, 3rd, 10th, 100th home purchases.
I can get more deductions from income housing expenses than I can from my own primary home expenses! I find that insane. Imbalance in property taxes is just part of a bigger picture.
Home prices aren’t driven by supply and demand for actual housing anymore. The fact that you can turn a profit in real estate while letting it sit empty is proof of that. It’s just a lucrative investment now, at the expense of others that are stuck renting all their lives, never able to get ahead on housing costs.
I don’t buy into the horseshit narrative than investment property owners are providing a service to people in need of housing. What they do is add another cost to the end user. If the investment wasn’t so lucrative perhaps the resident could afford the mortgage to begin with.
“The other part is supply and demand – there is simply not enough housing, particularly at the low end of the market, to meet existing demand.”
I don’t know enough to truly dispute that, but as I’ve mentioned a few times in other Rag articles, there are a # of condo and apartment complexes that are sitting anywhere from two thirds to three quarters empty. Many of those have been here for at least 4 years and they just are not attracting new residents due to their cost. Mostly downtown (East Village), Little Italy, Bankers Hill and a couple here in Hillcrest. I agree about a shortage of housing at the low end market, but in many areas the high end market is just not drawing many new people in and the owners/property mangers will not lower the prices/rents to attract any. I can’t for the life of me understand why that NEVER gets mentioned by any local media, especially considering most San Diegans are aware of it. I’ve sort of resined myself to the idea that simply is no rhyme and reason.
You also mention how you Seniors stubbornly stay in your homes (which is your right to do so) but I know many who have moved. If they can get an insanely high price for their home and move out of state to somewhere cheaper and increase their standard of living (not that it’s bad here) then they do. A friend of ours in her 70s sold her home for over a million and moved to Chattanooga and is REALLY living the life.
I’ve been to Chattanooga, and No Thanks!
Seriously, my wife is from the Gulf Coast and we compare prices when we go there to visit family. We could sell our home and move to a very nice home for a lot less money and a much lower cost of living (food, gas, taxes, etc.). But you’re still in Mississippi. We’re staying here.
Again all a matter of preference and priorities. I’ve been there (Chattanooga) and thought it was a fun town to visit and pretty hip for that area of the country but I have no plans to ever move there. Still there are lots of people who are leaving the state for lower costs elsewhere, including seniors.
Until your property taxes and cost of living get so high you won’t be able to continue living there and you find yourself either being booted out or being forced to sell. There is that reality facing you, you know. Has happened to a LOT of people I’m sure, and I know of a few. They no longer could afford living in a place that has been priced out of their range after 40 years of being their home. That just…sucks.
But then of course you could sell out like Chris’ 70 yr old friend and make a million or two on a crappy two-bedroom old frame house and live like a king in Mississippi. Um, well, then you’d have to start thinking about increasing numbers of hurricanes, tornadoes, floods, and living around people who like to fall down on the ground thrashing about while speaking gibberish like Trump’s latest nominee for a Supreme Court seat who has been documented as being part of a cult that does that… :)
Prop 13 should only be used for the primary residence not rentals or vacation homes, business properties, or STVRs etc etc. Just the home a family (or old person) lives in, and not one that they only sometimes occupy. A home is where you live, know your neighbors, spend a majority of your time in. Then they will die and the government will tax the crap out of it…but that’s for the next generation to deal with.
I’ve had my property tax raised this year, it’s called a ‘supplemental (isn’t that cute?) and, as a matter of fact,had it raised last year, too, which was also called a supplemental increase. It’s only supposed to be reassessed every three years but if you complain you get told to hire (for thousands of dollars) a professional appraiser to protest in front of the Board of Equalization. I just love that term, equalization. Now if only wages and pensions and retired folks’ Social Security got the same equalization treatment as taxes to the government gets… And the county changed the rules without them being voted on. Instead of being 3 years in arrears you can now only be 18 months behind before they auction your home out from under you.
Don’t you just love the ‘incremental’ taxation strategy? Keep Prop 13 just fix it the way it was supposed to be used. The wealthy and corporations and golf courses can pay through the nose for their privileges instead of shuffling the costs onto us!
sealintheSelkirks
Well to be fair, Chattanooga is not the kind of place you described, plus it’s not in Mississippi. In fact it’s a blue oasis in a sea of red.
Also her place was hardly a “shack” tho it certainly isn’t worth the money she got for it.
I just got my property tax bill. Wowsers. I guarantee it’ll effect my voting.
The previous owners were paying 10X less in taxes.
The real estate speculation and all that feeds into it is the main problem. This is a fairly recent phenomenon. Overvalued houses are causing great harm to people’s livelihoods. Dual income families is now a necessity and is not healthy for children, long commutes, the middle class are stuck paying full market rate rent…
My home here is old and tiny and yet my property tax bill is more than an average mortgage in some states.
Hey Seal! We agree on something!
Hey Geoff, it ain’t the first time! It happens more than we think. We just butt heads because we grew up in two very different environments and under far different cultural condtions. OB/MB and Pascagoula are more like two different countries…
sealintheSelkirks
seal, buddy you make too many assumptions that miss the mark, like the one on my position regarding pot.
I grew up in a Navy family and lived in various parts of this country. I was in Hawaii when it became a state. I’ve lived on the East and West and briefly, the Gulf, coasts. Spent five years buried in the midwest. Two years in the Bay Area and 43 here in San Diego. Does that fit your assumption?
Where in Mississippi, Paul? My folks lived in Pascagoula for six years, I spent one summer working in the Ingalls shipyard. Between the mosquitos and the humidity, the only way anyone could ever get me to stay there would be if I was being permanently planted. There are many places where the cost of living is less, when talking only about money. But, the real “cost” of living is another matter.
Geoff, I should have known you were a Goula Bum! My wife was born in Meridian, but grew up in Moss Point, next door to Pascagoula. Her father and most of her uncles worked at Ingalls. Her sister still lives in Pascagoula, which is why we go back there.
I would never live there. If you held a gun to my head and forced me to pick a place there, I might consider Ocean Springs, but, really…Heat, bugs, hurricanes, and, based on the comments my wife’s friends post on facebook, a lot of people I really do not want to associate with. Every time I go there I am so thankful to come back to San Diego.
Well, how about that, there’s coincidence. My first experience with Pascagoula was a haircut. I was 18 and flew into Mobile where my mom picked me up. She said she could not take me home unless I got a haircut or my dad would be pissed. My hair was barely over the tops of my ears. We went into this little barbershop and this little, skinny, old redneck barber walked around me and then said “I don’t see how you girls let your hair get this way.” He ignored my instructions and skinned me, that was how I went to college in 1969.
When I worked in the shipyard, I was on al all black paint drew and got to know several pretty well, one even invited me to his house. It was one of those boxy wooden homes on stilts. But, you are right about most other people.
I’m with you and your opinion of the place, ridiculously uncomfortable to live there. It has some bright spots, the food, Bayou La Batre and the blessing of the shrimp fleet, and New Orleans is not far away. Nice place to visit and then make you really grateful you live in San Diego.