America's Property Tax Advisor

California - Split-Roll Tax Plan Fails

BY SCOTT DONALD, IRVINE, NOVEMBER 2020

California voters narrowly rejected Proposition 15, which would have created a split-roll tax system. Commercial and industrial property would be reassessed every three years, while residential property would retain protection under the assessment cap created by Proposition 13.

 

Since its passage in 1978, Prop 13 has limited tax increases to 2% a year for inflation until a property is sold. With prices climbing at a much higher rate, taxpayers who have held homes and businesses for many years pay far less than what the market value would determine.

 

Had Prop 15 passed, analysts say tax hikes would have been felt most strongly by businesses that have held onto their properties for decades. Companies that have purchased California real estate in recent years are already taxed at close to the current market value of those properties.

 

Legacy businesses are often paying property taxes based on assessments that took place decades ago. By triggering new assessments, Prop 15 could have raised taxes on these companies many times over.

 

Supporters said Prop 15 would have closed what they see as a loophole allowing large corporations to avoid paying their fair share in taxes. Opponents said higher property taxes would be passed on to tenants, who during the current pandemic would either reduce their workforce, go out of business, or find ways to pass the cost on to all Californians.