| Friday, June 10, 2005
Split-roll property tax? Be very
As a longtime observer of government, I've come to realize
that no matter how much public money one gives to any
government agency or group of government workers, it will
absolutely, positively not be enough. The unions representing
the agency's workers will always cry poor-mouth, always find
ways to shake down the taxpayer for more money.
California's public school system consumes more than 40
percent of the budget, guaranteed by constitutional decree,
and the governor's budget would increase
educationspending by more than 7 percent, yet we've all
witnessed the California Teachers Association and its
unceasing anti-Arnold rallies and overheated "you're starving
the kids" rhetoric.
Under Gov. Gray Davis, the California Correctional Peace
Officers Association - the prison guards - received a 37
percent pay raise, and these workers receive some of the most
generous pension benefits in the nation. Yet they too are
joining the fray, pleading poverty and whining.
Nor is either group stopping with their anti-Arnold
rhetoric. They are also promoting a ballot initiative, now
being circulated for the June 2006 ballot or later, that would
obliterate Proposition 13 property-tax protections and earmark
the new revenue for - you guessed it - the programs that they
depend upon for their livelihoods.
Called the California Tax Fairness Act, this initiative
would impose on California what is called "split rolls" for
taxing property. There would be two separate tax rates - one
for homeowners, who would retain Prop. 13 protections, and
another for commercial property owners (businesses, stores,
industrial land owners, etc.), who would pay taxes based on
the latest assessed value and have their property reassessed
every year. On the surface, it appears to exclude apartment
buildings, but the Apartment Owners Association of Orange
County believes that the language is so imprecise that it
could possibly include multifamily properties. "Was it written
poorly by accident?" asked Matt Petteruto, director of public
affairs. "Or was it written poorly to leave future loopholes
to broaden what can be reassessed and what can't be?"
Currently, all property, residential and commercial, is
protected by the Prop. 13, the 1978 ballot initiative that
limits tax increases to 1 percent of the value of the property
with no more than a 2 percent increase in valuations each
year. The result of its passage was to protect Californians,
especially the elderly, from being priced out of their homes
as spikes in value increased tax payments.
Supporters argue that businesses don't pay their "fair
share" of taxes. To gain widespread public support, drafters
of the initiative earmarked the potential windfall in new tax
revenues, to be divided among teachers, law enforcement,
firefighters, transportation and senior citizens.
It has all the makings of mom and apple pie, but in
reality, if this initiative passes the whole state will feel
the pain as businesses flee eastward. It will knock the first
rung off the economic ladder, making small-business ownership
harder to achieve.
This state has a notoriously hostile climate for those who
invest, create jobs and operate rental units that house so
many California residents. The majority Democrats in the
Legislaturethink of business as barely a step above
evil, and they always are looking to increase income taxes and
regulations on them. Under Prop. 13, however, the state's
businesses have one of their few competitive advantages with
other states. Longtime businesses have relatively low
property-tax rates and newer businesses have tax
predictability. They know what the tax bill will be every
"There are job killers and business killers," said Rex
Hime, president of the California Business Properties
Association in Sacramento and a chief foe of the initiative.
"But this one is an economy killer. It's so draconian.
Proponents estimate that it will bring in $3.5 billion each
year, but they can't even estimate the first-year proceeds
because millions of commercial properties will be reassessed
to 2006 levels. Small family businesses. They'll lose it. They
will be wiped out."
It's nearly impossible to unravel the cascading impact of
split-roll property taxes. But it's clear it would be a
massive tax increase on every job-producing sector of the
economy. Vacant land would be affected, which would mean that
many projects would never get built. Cities would lose
revenue. Rents could go up significantly. Small businesses
would go bankrupt or flee. Prices for products would go up in
this already-pricey state. And split rolls might be just the
thing to bust our inflated real estate bubble, meaning the
loss of equity for everyone, homeowners included.
No one knows for sure. What I do know is two public-sector
unions are willing to push California to the economic brink
for selfish purposes.
Which brings me to an initiative that will almost certainly
be on the November ballot: Paycheck Protection. This would
require unions to get consent from their members before simply
hitting them with higher dues to pay for these kamikaze
Vote for that one, and maybe we'll put an end to split
rolls and other economy-sapping, freedom-destroying union
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