California's Prop. 13 May See Some Changes That Aren't Necessarily Business-Friendly

Date: February 27, 2018

California may soon be making a dramatic change in its commercial and industrial properties’ property taxes.

Proposed for the November 2018 ballot, the initiative could add $6 to $10 billion to state coffers annually. This information came from a report by California’s nonpartisan Legislative Analyst’s Office, as quoted by the Los Angeles Times.

It would make changes to California’s Proposition 13, which passed in 1978, that capped how much property tax bills could increase. The cap was at one percent of a property’s purchase price. It could not increase more than two percent per year even if the property’s value triples.

The change would mean that the state would receive more tax dollars from commercial and industrial properties by assessing them at their current market value. The existing tax protections on homes would stay the same. Since the change to Prop. 13 would mostly affect commercial and industrial properties, and does not include residential property, the effort has become known as a “split roll.”

According to the Los Angeles Times, although the amount of money raised would be a significant amount, the revenue would depend heavily on the health of the real estate market making the change potentially volatile. It could also cause businesses to leave or choose to not relocate to California.

The money raised from the change would go to schools and other programs and services.

The measure could have indirect effects on the state’s economy. For example, the measure would increase taxes paid by many businesses, thereby increasing their costs of operating in California relative to other states. This would influence some businesses’ decisions about whether to expand in or move to California. Overall, the measure’s effect on the health of the state’s economy is uncertain,” the Legislative Analyst Office report stated.


Related Content: News | State | California | Economy | State | Tax Help | Taxes

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