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Serving in the Legislature for six years, I had a front row seat to the culture in Sacramento where operatives strategize and execute plans to continuously raise your taxes to fund an ever expanding state government. For the first time in years, our state budget is running a surplus, and yet the demand for more of your money never ceases. The lobby for bigger government is alive and well in California, backed by creative think tanks and pressure groups dedicated to finding new ways to further separate you from your income. While your paycheck doesn’t buy what it used to, neither do your ever-increasing tax “investments.”
Most of us expect our “investment” in government to provide transportation and water infrastructure to keep up with the growing population. We expect our schools to be funded such that the money actually reaches the classroom. We expect safe neighborhoods through well-funded public safety enhancements. However, we don’t seem to getting a very good return on our investment. We pay higher rates for scarce water and power and remain stuck in traffic as the state attempts to change our behaviors by redirecting our road and highway improvement dollars to alternative transportation modes. Our local PTA’s are constantly fundraising to provide supplies and curriculum that used to be included in the education funding package. As for public safety funding, dollars are inadequate to fund the ever-increasing load of “local control” issues being mandated by the state.
If you’re a taxpaying homeowner, renter or business owner you may not be aware of the tsunami about to hit the shore in 2016. You will likely have the opportunity to vote on several initiatives asking for higher taxes. The most offensive tax increase proposal, “split roll,” proposes to increase the tax on commercial properties, but not your home (yet). This change will lead to higher taxes for all commercial properties including apartments, offices, and industrial properties. And if this measure passes at the ballot box, your home will be the next target.
For millions of Southern Californians, the only tax certainty we have rests with Proposition 13, the landmark property tax limitation measure. To review a little history, in the late 1970’s, property taxes in California were spiking to such a dramatic degree that grandparents were literally being taxed out of their homes. A local business leader named Howard Jarvis saw this happening across the state, and led a bipartisan fight to pass the sweeping tax reform measure known as Proposition 13. Since its passage 37 years ago, Proposition 13 has kept property taxes reasonable and predictable for homeowners and businesses.
Under a split roll regime, commercial property would be assessed at a higher rate than residential property. Split roll would hold commercial property to a different and higher standard for assessment. This “tax the rich” strategy doesn’t just hurt large corporations; it actually redirects the burden on small businesses, leading to higher costs for everyone. Many small businesses have low profit margins, and due to a looming minimum wage hike, may be forced to make the tough decision of whether to cut their workforce or increase prices. A higher property tax rate will be an added expense and would most likely be passed on to the lessor or small business owner per the lease agreement and further impact their hiring decisions.
If split roll becomes law, it won’t be long before homeowners will be the focus of the next tax hike. Unraveling Proposition 13 in total is perceived to be the tax bonanza for Sacramento funding woes. But, the results for renters and homeowners would be disastrous as homeownership costs escalate and resale values decrease. The uncertain tax scenario we witnessed in 1978 could very easily occur once more.
California does not exist in a vacuum. People can and do vote with their feet, and when doing business in Yuma or Reno is more attractive than San Jose, San Diego or Irvine, it’s time state lawmakers examine their priorities. Once employers decide to shift employment out of state or to international markets, jobs are lost forever, depriving California of revenue. We have witnessed the cannibalizing of industry in the Rust Belt, and it can happen here.