Is a Change on the Horizon for Prop 13 in 2020?

As it is currently written, Proposition 13 treats all California property taxes the same. It has been this way since 1978, but is a change on the horizon in 2020? If critics have their way, the answer may be yes.

Opponents of the Prop 13 are asking for it to be downsized and exclude most commercial property from the law’s strict tax limits. Many believe that while California’s political landscape has changed dramatically in the last 40 years, the overarching feeling about Prop 13 has remained largely the same.

In fact, according to a Public Policy Institute of California poll from last year, 65% of likely voters said Prop 13 has been mostly a good thing for California.

However, surveys have also found that voters are perhaps willing to reimagine tax rules for businesses, which is why the ballot measure is being submitted for review to state officials. The proposed change would have county assessors splitting their tax rolls into two different lists: homeowners and small businesses, who would continue to receive full Prop 13 benefits, and commercial and industrial property owners, who would be required to pay more.

Currently, Prop 13 provides for a 1% tax based on the property’s purchase value and annual tax increases of no more than 2%. Proponents of the change say that tax rates wouldn’t change for commercial and industrial property owners, but come 2022, taxes would be based on the current market value of the real estate.

One of the biggest changes to the newest proposal involves small businesses, which are defined as having 50 or fewer employees. They would keep their current low-tax rules assuming their value is not more than $3 million, and that amount would be adjusted for inflation moving forward.

Proponents of the revised measure include Service Employees International Union, the California Teachers Association and the California Federation of Teachers, some of California’s most powerful public unions with the financial means to back this initiative.

And they stand to benefit heavily, with schools receiving the majority of the tax revenue estimated at approximately $7 billion per year. This is in addition to funds already received by K-12 schools and community colleges. The hope is that voters will be more apt to approve the change to Prop 13 with education benefiting from the tax change.

Because 2020 is a presidential election year, those behind the Prop 13 revision believe it will be their best shot at a good voter turnout. There is no doubt that in the ramp-up to the 2020 election, Californians will hear from both sides of the Prop 13 debate, leaving the decision in the hands of voters.

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