Concerns over the California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative.
In November, California’s ballot will include the California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative. Under this initiative, commercial properties would be reassessed to market value every three years. The property would then be taxed according to these value assessments.
Also known as the split roll tax, this initiative would undo many of the protections that commercial real estate has under Proposition 13, which was passed in 1978. Under Prop. 13, commercial property taxes are based on the property’s original purchase price and are not allowed to be increased by more than 2% each year. Additionally, this proposition states that property taxes can only be reassessed to market value when the property is sold.
Should the split roll tax pass, experts fear that California’s small businesses would suffer and eventually fail. With physical storefronts already struggling amidst the e-commerce boom, the added property tax would be difficult to overcome. Many critics of the initiative contend that the tax would have devastating effects on California’s economy, and reference a 2010 study that predicts that 100,000 to 150,000 jobs could be at risk if the state-based commercial property taxes on full-market values.
Additionally, critics note that the tax would trickle down and affect consumers as well. As business owners struggle to pay their increased taxes, they would have no choice but to raise their prices. Opponents of the split tax warn that it will ultimately be the average consumer that is forced to shoulder the burden of the commercial property tax increases.
However, supporters of the initiative claim that the tax is the best way for California’s business owners to finally pay their dues. After years of exploiting Prop. 13’s loophole, California’s businesses have avoided paying an estimated $12 billion in taxes that would have gone to support local governments and schools. Supporters of the initiative include teachers, labor unions, and Facebook co-founder Mark Zuckerberg and his wife, Priscilla Chan.
This is what you should know about the California Tax on Commercial and Industrial Properties for Education and Local Government Funding Initiative, or split roll tax. Want to stay up to date with the latest commercial real estate news? If so, then contact the experts at California Commercial Realty Advisors, Inc. Your commercial realty advisors are eager to assist you with all your real estate needs today.