Voter's Edge California Voter Guide
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November 3, 2020 — California General Election
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State of California
Proposition 15 — Taxes on Commercial Property Initiative Constitutional Amendment - Majority Approval Required

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INCREASES FUNDING SOURCES FOR PUBLIC SCHOOLS, COMMUNITY COLLEGES, AND LOCAL GOVERNMENT SERVICES BY CHANGING TAX ASSESSMENT OF COMMERCIAL AND INDUSTRIAL PROPERTY. INITIATIVE CONSTITUTIONAL AMENDMENT.

Taxes such properties based on current market value, instead of purchase price.

Fiscal impact: Increased property taxes on commercial properties worth more than $3 million providing $6.5 billion to $11.5 billion in new funding to local government and schools.

Put on the Ballot by Petition Signatures

What is this proposal?

Easy Voter Guide — Summary for new and busy voters

Information provided by The League of Women Voters of California Education Fund

The way it is now

Land used for businesses and shopping centers is called “commercial property.” Owners of commercial property pay taxes based on how much the property was worth at the time it was purchased. These taxes go up by a small percent each year. Money from property taxes goes to local governments. These include cities, counties, public schools and special districts, such as library and fire districts.

What if it passes?

Prop 15 would change the rules for taxes on commercial property. Commercial property would be taxed based on what the property is worth now, instead of small increases each year based on its purchase price. The new rules would only apply to people and businesses that own more than $3 million in commercial property. There would be no change to taxes on residential homes. Prop 15 would also lower taxes on business equipment, such as machines or computers.

Budget effect

Local governments would get between $6.5 billion and $11.5 billion more in property taxes each year starting in 2025. The range is big because it is hard to estimate how much commercial property will be worth each year. Counties might need to spend more money collecting property taxes.

People FOR say

  • Wealthy companies and business property owners should pay property taxes based on what their holdings are really worth.
  • Taxes from Prop 15 will help pay for important public services, such as schools and fire departments.

People AGAINST say

  • Raising taxes will increase the cost of everything that people buy, including food, gas and health care.
  • Prop 15 will hurt small businesses that are struggling during the current pandemic.

Pros & Cons — Unbiased explanation with arguments for and against

Information provided by League of Women Voters of California Education Fund

The Question

Should the California Constitution be amended so that most commercial and industrial property is reassessed on a regular basis?

The Situation

Taxes based on the value of commercial and industrial property are a major source of funding for counties, cities, schools, and special districts. Each year a property owner pays a tax equal to the property’s assessed value times the applicable tax rate. Proposition 13 limits property tax valuation and rates. The tax rate is capped at 1% of the assessed value plus smaller, voter-approved rates, to finance local infrastructure.

A property’s market value is the value at which it could be sold today. A property is reassessed to market value when it is purchased or when ownership changes hands. After that, the assessed value can be increased by no more than 2% per year. Because the value of property has typically increased much faster than 2% per year, the assessed value of most property in the state is less than its market value. This is particularly true of commercial and industrial property, which changes ownership less often than residential property.

Each county’s property tax receipts from the 1% tax are distributed to local governments and schools using a formula that has been in place for many years.

The Proposal

If passed, Proposition 15 would generally require that commercial property be reassessed to market value on a periodic basis. There would be no changes in the rules for reassessment of residential (both owner-occupied and rental) and farm property. If all of the property owned by a business has a fair market value of $3 million or less, that property would continue to be assessed based on purchase price, as adjusted. Reassessment of commercial property would be phased in starting with the tax year 2022-2023.

Under Proposition 15, a small business would not pay any tax on personal property. A small business is defined as one having fewer than 50 employees. Other businesses would not pay taxes on the first $500,000 of their personal property. Reassessment of commercial and industrial property to market value would increase the property taxes collected in each county. After paying for the costs of administering this measure and reimbursing the state for any loss of income tax receipts, the balance of the additional revenue would be used to fund local governments and schools. The money for local governments (about 60% of the total) would be distributed according to the existing formula. The money for schools (about 40% of the total) would be deposited into a state fund and allocated among school districts generally using the same per-pupil funding formulas the State currently uses. This allocation would provide money over and above the current constitutional minimum funding requirement.  

Fiscal effect

The Office of the Legislative Analyst of California estimates that Proposition 15 would produce about $6.5 to $11.5 billion per year in additional property tax revenues for local services. Of this amount approximately 60% would be distributed to local governments ($3.9 - $6.9B). The remainder ($2.6 - $4.6 B) would go to schools and community colleges.

Supporters say

  • Prop 15 provides billions in new revenue for our communities and schools.
  • 10% of the wealthiest businesses will provide more than 90% of the revenue.
  • Gives tax breaks to small businesses to help our economy grow.
  • Keeps Prop 13’s protection for homeowners, renters, and farms.

Opponents say

  • Prop 15 would trigger the largest property tax increase in California’s history.
  • Additional costs will ultimately raise prices for consumers.
  • Will make it harder for people to start small businesses.
  • Will require huge cost to administer.

Measure Details — Official information about this measure

YES vote means

A YES vote on this measure means: Property taxes on most commercial properties worth more than $3 million would go up in order to provide new funding to local governments and schools.

NO vote means

A NO vote on this measure means: Property taxes on commercial properties would stay the same. Local governments and schools would not get new funding.

Summary

Source: Office of the Attorney General - Official Voter Information Guide p. 22

OFFICIAL TITLE AND SUMMARY
PREPARED BY THE ATTORNEY GENERAL 

PROPOSITION 15.
INCREASES FUNDING SOURCES FOR PUBLIC SCHOOLS, COMMUNITY COLLEGES, AND LOCAL GOVERNMENT SERVICES BY CHANGING TAX ASSESSMENT OF COMMERCIAL AND INDUSTRIAL PROPERTY. INITIATIVE CONSTITUTIONAL AMENDMENT.

  • Increases funding sources for K–12 public schools, community colleges, and local governments by requiring commercial and industrial real property be taxed based on current market value, instead of purchase price.
  • Exempts from taxation changes: residential properties; agricultural land; and owners of commercial and industrial properties with combined value of $3 million or less.
  • Any additional education funding will supplement existing school funding guarantees.
  • Exempts small businesses from personal property tax; for other businesses, provides $500,000 exemption.

SUMMARY OF LEGISLATIVE ANALYST’S ESTIMATE OF NET STATE AND LOCAL GOVERNMENT FISCAL IMPACT: 

  • Increased property taxes on commercial properties worth more than $3 million providing $6.5 billion to $11.5 billion in new funding to local governments and schools. 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=22

Background

Source: Legislative Analyst's Office - Official Voter Information Guide p. 22

BACKGROUND

Local Governments Tax Property. California cities, counties, schools, and special districts (such as a fire protection district) collect property taxes from property owners based on the value of their property. Property taxes raise around $65 billion each year for these local governments. Overall, about 60 percent of property taxes go to cities, counties, and special districts. The other 40 percent goes to schools and community colleges. These shares are different in different counties.

Property Includes Land, Buildings, Machinery, and Equipment. Property taxes apply to many kinds of property. Land and buildings are taxed. Businesses also pay property taxes on most other things they own. This includes equipment, machinery, computers, and furniture. We call these things “business equipment.”

How Is a Property Tax Bill Calculated? Each property owner’s annual property tax bill is equal to the taxable value of their property multiplied by their property tax rate. The typical property owner’s property tax rate is 1.1 percent.

Taxable Value of Land and Buildings Is Based on Original Purchase Price. In the year a piece of land or a building is purchased, its taxable value typically is its purchase price. Each year after that, the property’s taxable value is adjusted for inflation by up to 2 percent. When a property is sold again, its taxable value is reset to its new purchase price. The taxable value of most land and buildings is less than what they could be sold for. This is because the price most properties could be sold for grows faster than 2 percent per year.

Taxable Value of Business Equipment Is Based on How Much It Could Be Sold for. Unlike land and buildings, business equipment is taxed based on how much it could be sold for today.

Counties Manage the Property Tax. County assessors determine the taxable value of property. County tax collectors bill property owners. County auditors distribute tax revenue to local governments. Statewide, counties spend about $800 million each year on these activities. 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=22

Impartial analysis / Proposal

Source: Legislative Analyst's Office - Official Voter Information Guide pp. 22-23

PROPOSAL 

Tax Commercial and Industrial Land and Buildings Based on How Much They Could Be Sold for. The measure requires commercial and industrial (after this referred to simply as “commercial”) land and buildings to be taxed based on how much they could be sold for instead of their original purchase price. This change is put in place over time starting in 2022. The change does not start before 2025 for properties used by California businesses that meet certain rules and have 50 or fewer employees. Housing and agricultural land continues to be taxed based on its original purchase price.

Some Lower Value Properties Not Included. This change does not apply if the owner has $3 million or less worth of commercial land and buildings in California (adjusted for inflation every two years). These properties continue to be taxed based on original purchase price.

Reduce Taxes on Business Equipment. The measure reduces the taxable value of each business’s equipment by $500,000 starting in 2024. Businesses with less than $500,000 of equipment pay no taxes on those items. All property taxes on business equipment are eliminated for California businesses that meet certain rules and have 50 or fewer employees. 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=22

Financial effect

Source: Legislative Analyst's Office - Official Voter Information Guide p. 23

FISCAL EFFECTS 

Increased Taxes on Commercial Land and Buildings. Most owners of commercial land and buildings worth more than $3 million would pay higher property taxes. Only some of these property owners would start to pay higher taxes in 2022. By 2025, most of these property owners would pay higher taxes. Beginning in 2025, total property taxes from commercial land and buildings probably would be $8 billion to $12.5 billion higher in most years. The value of commercial property can change a lot from year to year. This means the amount of increased property taxes also could change a lot from year to year.

Decreased Taxes on Business Equipment. Property taxes on business equipment probably would be several hundred million dollars lower each year.

Money Set Aside to Pay Costs of the Measure. The measure sets aside money for variouscosts created by the measure. This includes giving several hundred million dollars per year to counties to pay for their costs of carrying out the measure. The measure would increase the amount of work county assessors do and could require changes in how they do their work. Counties could have costs from the measure before new money is available to cover these costs. The state would loan money to counties to cover these initial costs until new property tax revenue is available.

New Funding for Local Governments and Schools. Overall, $6.5 billion to $11.5 billion per year in new property taxes would go to local governments. 60 percent would go to cities, counties, and special districts. Each city, county, or special district’s share of the money depends on several things including the amount of new taxes paid by commercial properties in that community. Not all governments would be guaranteed new money. Some in rural areas may end up losing money because of lower taxes on business equipment. The other 40 percent would increase funding for schools and community colleges. Each school or community college’s share of the money is mostly based on how many students they have. 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=23

Published Arguments — Arguments for and against the ballot measure

Arguments FOR

Arguments are the opinions of the authors, and have not been checked for accuracy by any official agency. 

Prop. 15 is a fair and balanced reform that: closes property tax loopholes benefitting wealthy corporations, cuts taxes for small businesses, protects homeowners and renters, requires full transparency and reclaims billions of dollars for schools and local communities. Supported by nurses, teachers, small business owners, affordable housing advocates and community organizations.

FOR ADDITIONAL INFORMATION FOR:
Tracy Zeluff
Schools and Communities First--Yes on Prop 15
731 South Spring St.
Los Angeles, CA 90014
(213) 935-8009
info@schoolsandcommunitiesfirst.org
yes15.org

— Source: California Secretary of State - Official Voter Information Guide p. 8

Arguments FOR

Arguments are the opinions of the authors, and have not been checked for accuracy by any official agency. 

ARGUMENT IN FAVOR OF PROPOSITION 15 

We are all better off when everyone pays their fair share. But California is giving away billions of dollars in property tax breaks to wealthy corporations. These billions could be used instead to deal with increasing inequality, persistent poverty, unemployment, unaffordable housing, homelessness and underfunded schools.

While the wealthiest corporations avoid paying their fair share, our schools have the most crowded classrooms in the nation and our local communities are struggling to respond to the impact of COVID-19.

Prop. 15 is a fair and balanced reform which:

  • closes property tax loopholes benefiting wealthy corporations
  • cuts small business taxes
  • reclaims billions of dollars to invest in our schools and local communities.

Prop. 15 will:
Close corporate loopholes: Wealthy corporations avoid reassessment by employing highly paid tax lawyers and accountants to exploit loopholes in the law. Prop. 15 closes these loopholes by requiring nonresidential commercial properties to be assessed based on their actual fair market value.

  • The top 10% of California’s most valuable nonresidential commercial properties account for 92% of Prop. 15’s new revenues.

Does not impact homeowners and renters: Prop. 15 exempts all residential properties, maintaining FULL PROP. 13 PROTECTIONS for homeowners and renters.

Cut taxes for small businesses: Prop. 15 protects small businesses and cuts their taxes by:

  • Exempting businesses operated out of a home and businesses owning $3,000,000 or less of nonresidential commercial property
  • Cutting business personal property taxes on equipment, computers and fixtures.

Restore balance to the property tax: Since Prop. 13 passed, the residential share of property taxes has skyrocketed from 55% to 72% and the nonresidential commercial share has fallen. Meanwhile we’re paying more in fees, fines and other taxes.

Prop. 15 rebalances the scales.
Increase funding for schools and community colleges: Every school district and community college will receive additional funding over and above existing funding guarantees. Prop. 15 funds go directly to education and state politicians can’t take it away.

Invest in essential workers and local services: Prop. 15 gives local communities desperately needed resources so essential services and frontline workers can respond to current challenges and prepare for future crises, whether from a wildfire, pandemic, or earthquake.

Support economic and racial equity: Prop. 15 makes sure schools with the greatest needs get the most help and gives local communities critically needed resources to deal with the unequal impacts of COVID-19, unemployment, and housing costs on communities of color.

Prioritize full transparency and accountability by requiring schools and local governments to publicly disclose all new revenues they receive and how they are spent. Protect agricultural land: Prop. 15 makes no change to existing laws affecting the taxation or preservation of agricultural land.

We can’t afford business as usual. Prop. 15 rebalances the scales by closing loopholes and supporting our schools, local communities and small businesses.

Prop. 15 takes a big step forward toward a better future for all Californians. It was placed on the ballot by the signatures of over 1,700,000 voters who want wealthy corporations to pay their fair share.

Please add your voice to theirs: Vote Yes on Prop. 15.

TONY THURMOND, California Superintendent of Public Instruction

JACQUELINE MARTINEZ, CEO
Latino Community Foundation

SASHA CUTTLER, Public Health Nurse
San Francisco Department of Public Health 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=24

— Official Voter Information Guide

Arguments AGAINST

Arguments are the opinions of the authors, and have not been checked for accuracy by any official agency. 

Prop 15 is a $12.5 billion property tax increase that raises our cost of living and makes everything we buy - food, gas, utilities, day care and health care - more expensive. Prop 15 repeals taxpayer protections in Prop 13. NO on Prop 15!

FOR ADDITIONAL INFORMATION AGAINST:
No on Prop 15--Stop Higher Property Taxes and Save Prop 13
(916) 538-0376
info@NOonProp15.org
www.NOonProp15.org

— Source: California Secretary of State - Official Voter Information Guide p. 8

Arguments AGAINST

Arguments are the opinions of the authors, and have not been checked for accuracy by any official agency. 

ARGUMENT AGAINST PROPOSITION 15

PROP. 15 WILL BE THE LARGEST ANNUAL PROPERTY TAX INCREASE IN CALIFORNIA HISTORY—UP TO $12.5 BILLION PER YEAR!

Prop. 15’s massive increase in annual property taxes will have disastrous economic impacts for every Californian—from small businesses and consumers to farmers and homeowners.

PROP. 15 REPEALS TAXPAYER PROTECTIONS IN PROP. 13

Prop. 13’s taxpayer protections have kept property taxes affordable by capping property taxes and limiting increases annually, providing taxpayers certainty they can afford their property taxes now and into the future. Prop. 15 eliminates that certainty for millions of taxpayers.

  • “Prop. 15 is a direct threat to homeowners. Supporters of the tax hike openly admitted that this is merely the first step in completely dismantling Prop. 13 which voters approved to stop skyrocketing property taxes.”—Jon Coupal, President, Howard Jarvis Taxpayers Association

PROP. 15 RAISES OUR COST OF LIVING
Prop. 15’s tax hike will increase costs on everything people buy, including groceries, fuel, utilities, day care and health care.

  • “Too many families have been priced out of their neighborhoods because of the rising cost of living. Prop. 15 will raise the cost of living for California families by up to $960 and will especially hurt lower-income communities.” —Alice Huffman, President, California State Conference of the NAACP

PROP. 15 DESTROYS JOBS AND SMALL BUSINESSES
Seven million Californians work for a small business. Millions of Californians are filing for unemployment and are at risk of losing everything. NOTHING in Prop. 15 stops the tax from being passed on to small business tenants. Prop. 15 will make the economic crisis worse by devastating small businesses—including our neighborhood restaurants, barbershops, and dry cleaners.

  • “Most small businesses rent the property on which they operate. Prop. 15’s higher property taxes will mean skyrocketing rents at a time we can least afford it.” —Jot Condie, President, California Restaurant Association

PROP. 15 RAISES TAXES FOR FAMILY FARMERS, RESULTING IN HIGHER COSTS FOR FOOD
Prop. 15 will raise property taxes on farming—including barns, dairies, processing plants and even fruit and nut trees.

  • “Prop. 15 hurts family farmers and we all will end up paying higher costs for groceries including milk, eggs and meat.”—Jamie Johansson, President, California Farm Bureau Federation

PROP. 15 LACKS ACCOUNTABILITY
Prop. 15 will cost taxpayers $1 billion each year in bureaucratic expenses, and politicians can spend the higher property tax revenue on anything they want, including administrative costs, outside consultants and pay raises.

  • “Prop. 15 allows politicians to divert its tax hike revenue to anything the special interests want, just like they’re doing with the gas tax.”—Marilyn Markham, Board Member, California Senior Advocates League

INDEPENDENTS, DEMOCRATS AND REPUBLICANS AGREE—NO ON PROP. 15.

NOW IS NOT THE TIME TO RAISE PROPERTY TAXES IN CALIFORNIA.

ROBERT GUTIERREZ, President
California Taxpayers Association

ALICE HUFFMAN, President
California State Conference of the NAACP

BETTY JO TOCCOLI, President
California Small Business Association 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=25

— Official Voter Information Guide

Replies to Arguments FOR

Arguments are the opinions of the authors, and have not been checked for accuracy by any official agency. 

REBUTTAL TO ARGUMENT IN FAVOR OF PROPOSITION 15

PROP. 15: ALL CALIFORNIANS WILL PAY FOR THE LARGEST PROPERTY TAX INCREASE IN STATE HISTORY! REPEALS PROP. 13 PROTECTIONS
Prop 13 limits property tax increases to 2% annually, providing certainty to homeowners and small businesses that they can afford their taxes in the future. Supporters of Prop 15 admit they’ll go after Prop 13 protections for homes next - meaning skyrocketing taxes for all homeowners!

PROP. 15: RAISES OUR COST OF LIVING AND MAKES INCOME INEQUALITY WORSE
Billions in higher taxes will be passed on to California’s small businesses in the form of higher rents, forcing businesses that are barely surviving now to lay off employees and raise prices. Higher costs for food and everyday necessities will hit all of us and low-income families hardest. We can’t afford to raise our cost of living.

PROP. 15: DOESN’T SOLVE OUR CURRENT BUDGET CRISIS
Prop. 15 will not solve today’s budget deficits. The nonpartisan Legislative Analyst says most funding won’t arrive until 2025. Additionally, the California Assessors’ Association says Prop. 15 will cost more than $1 billion to implement, meaning deeper cuts to already stretched local government budgets.

PROP. 15: MISLEADING AND LACKS ACCOUNTABILITY
Prop. 15’s supporters say it’s about more money for education, but nearly 70% of the tax money doesn’t even go to schools. Politicians can even divert the local government tax money for other purposes, just like they’re doing with the gas tax.

NO ON PROP. 15.

www.NOonProp15.org

JON COUPAL, President
Howard Jarvis Taxpayers Association

ALICE HUFFMAN, President
California State Conference of the NAACP

BETTY JO TOCCOLI, President
California Small Business Association 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=24

— Official Voter Information Guide

Replies to Arguments AGAINST

Arguments are the opinions of the authors, and have not been checked for accuracy by any official agency. 

REBUTTAL TO ARGUMENT AGAINST PROPOSITION 15

Prop. 15 is a fair and balanced reform which: - Closes property tax loopholes benefiting wealthy corporations - Cuts small business taxes - Does not impact homeowners and renters - Reclaims billions of dollars for schools and local communities

California must take these steps right now to secure a better future for us all.

Wealthy owners of the MOST EXPENSIVE 10% OF BUSINESS PROPERTIES account for 92% of Prop. 15’s revenues.

Prop. 15 supporters: teachers, nurses, small business owners, clergy, affordable housing advocates, and community organizations who want to close corporate tax loopholes and rebalance the scales.

Prop. 15 opponents: wealthy corporations and out-of-state investors trying to keep their tax breaks by using scare tactics to confuse the issue.

Read the measure for yourself and remember, Prop. 15:

  • Maintains FULL PROP. 13 PROTECTIONS for homeowners and renters.
  • CUTS small business taxes AND specifically exempts all home-based businesses AND exempts small businesses owning $3,000,000 or less in business property.
  • Guarantees transparency and accountability by requiring full public disclosure of all new revenues and how they’re spent.
  • Keeps Prop. 13’s low 1% limit, so California’s business property taxes will still be below most states.

Learn more at scaretactics15.org.

As we rebuild from the COVID-19 shut down and prepare for challenges ahead, business as usual won’t do. It’s time we invest in small businesses, students, healthy families, and safe neighborhoods.

Prop. 15 is a balanced reform that closes corporate loopholes benefiting the top 10% and restores billions to our schools and communities—Vote Yes on Prop. 15.

E. TOBY BOYD, President
California Teachers Association

CAROL MOON GOLDBERG, President
League of Women Voters

TARA LYNN GRAY, CEO
Fresno Metro Black Chamber of Commerce 

https://vig.cdn.sos.ca.gov/2020/general/pdf/complete-vig.pdf#page=25

— Official Voter Information Guide

Who supports or opposes this measure?

Yes on Proposition 15

Organizations (521)

Elected & Appointed Officials (669)