Prop. 15 Would Close a Corporate Tax Loophole. Here’s How It Got There in the First Place

Speaker 1: 00:00 This year, California voters have a shot at overturning. One of the most notorious propositions of recent decades or part of it. Anyways, proposition 15 on the November ballot would increase property taxes on corporations undoing a key component of prop 13. That 1978 landmark ballot measure was sold to voters as a way of helping homeowners. But critics say it's still a big blow to state school funding and was a boon to companies. We explore why commercial property was included in the original measure. [inaudible] politics editor. Scott Schaffer takes a look at why commercial properties was even included in the first place. Speaker 2: 00:36 In 1978, inflation was running high and it was driving up property taxes paid by California homeowners and a political gadfly in Southern California was honest. We have a new revolution against the arrogant politicians and insensitive bureaucrats. Jarvis collected enough signatures that year to place a massive property tax cut on the ballot. Proposition 13 on KQ EDtv that year, he framed prop 13. This way that people that are being hurt are the elderly people on limited incomes who has spent all their life earning a home and their state is taking them out in droves. And this is what this is about, but in that same KQBD appearance, San Francisco, assemblyman, Leah McCarthy noted the corporations were also going to get huge tax breaks under the Jarvis measure. Let me give you an example of some of the business, uh, cuts that would result Pacific telephone would have a $130 million cut standard oil, 13 million Southern Pacific, 12 million. Speaker 2: 01:39 They didn't ask for the cuts, but mr. Jarvis is kind enough to give them to them. Prop 13 did not distinguish between residential and commercial property, but Joel Fox who worked for Howard Jarvis said California had always treated commercial and residential property the same way. So in writing an amendment to the constitution on property taxes, it was just simple to maintain what was already in the constitution. In fact, business groups, opposed prop 13 and gave money to defeat it. But since it passed residential and commercial property taxes have only gone up more than 2% when a property was sold. But how selling a property was legally defined was left to the legislature and her San Francisco Democrat, Willie Brown. I wrote the implementation process after it had been passed by the voters as chairman of the assembly revenue and tax committee. Brown wrote the law defining exactly when a commercial property would be reassessed. Speaker 2: 02:36 He says, now they blew it. We should have said anytime. There is a change in the ownership of the property through any means that constitutes a transfer for reassessment purposes. Under the legislature's rules, a commercial property was only reassessed when 50% or more of the property legally changed hands and big corporations have benefited ever since prop 15 on the November ballot would close that corporate loophole, reassessing commercial property and basing the taxes on current market value, not what it cost to buy it. Business groups, oppose prop 15 saying that raising taxes in the middle of a recession is a bad idea, but Manuel Pastore director of the USC program for environmental and regional equity notes, that things have changed in California since prop 13 passed slashing funds for public schools and services. Speaker 3: 03:33 The question is, are we the California that passed prop 13? Are we the California that wants to reevaluate that? I think that investments in young people, Speaker 2: 03:44 If prop 15 passes many will say, it's the end of an era that ushered in a California tax revolt. Speaker 1: 03:51 That was KQBD Scott Schafer.