ICYMI: Top Takeaways from Briefing on New Prop. 15 Report
10% of the biggest, most valuable commercial and industrial properties would generate 92% of Prop. 15 revenue
“These property owners who are benefiting from this loophole in taxes are not passing a dime on down to tenants, they’re charging market rate”
In yesterday’s briefing on the new Concentration of Revenue Generated by Proposition 15 report, state finance expert Tim Gage and Minority Business Consortium CEO Walter Wilson provided key insight on how Prop. 15 would generate revenue from a fraction of top corporations in the state and why small businesses stand to benefit from the measure:
“The responsibility for higher taxes from the measure is highly concentrated among a small percentage of properties.” 10% of commercial and industrial properties would generate 92% of the revenues raised by the measure. Digging further into the data, reassessing only the top 2% of such properties will generate more than three-quarters of all the new revenue.
“The large share of revenues coming from a small percentage of commercial properties results in large part from the fact that those properties are the most under-assessed.” On average, properties that will be reassessed under Prop. 15 are under-assessed by 50% or more – meaning that they have the largest gap between their assessed and market values.
“Nearly 50% of the revenue from the measure will come from properties that have not been reassessed since before 2000.” While nearly half of the revenue raised from the measure will come from properties that haven’t been reassessed for more than 20 years, more than a quarter will come from such properties that haven’t been reassessed for more than 30 years.
“New business personal property tax exemption likely means that the overall impact is even more concentrated among a relatively small share of commercial properties.” In addition to the exemption provided for properties worth $3 million and less, it’s worth noting that Prop. 15 includes a provision that exempts all businesses from property taxes on business personal property up to $500,000 and completely exempts small businesses from such taxes.
“These property owners who are benefiting from this loophole in taxes are not passing a dime on down to tenants, they’re charging market rate – just as though their taxes were the same as someone else’s.” The market sets rents. To the extent that a business landlord has been benefiting from lower property taxes by virtue of not being reassessed, the business landlord has not in all likelihood been passing those savings on to small business tenants. Rents are set by the market.
The Schools & Communities First initiative, Proposition 15 on the November ballot, will close corporate property tax loopholes to reclaim billions every year for California’s K-12 schools, community colleges, and local communities – all while exempting homeowners and renters, small businesses, and agricultural land. Polling has consistently shown that Californians overwhelmingly support closing corporate tax loopholes to reclaim funding for their schools and local communities – in addition to PPIC polling showing a 7 point increase in support for the measure between November 2019 and April 2020, polling of the ballot language that voters will see in November showed 58% support from likely California voters.