Pro-103 Group Seeks to Raise Business Tax

Victorious at the ballot box and in court, the consumer activists who brought California the historic Proposition 103 insurance revolt have prepared a new and equally audacious measure to more than double business property taxes and grant each family in the state an annual $500 tax cut.

The new initiative proposal drafted by the group known as Voter Revolt, would strip businesses of much--but not all--of the property tax benefits of the famous, decade-old Proposition 13.

At the same time, Voter Revolt said property tax provisions for homeowners and renters would be unchanged--except for a $500 reduction in the annual property tax bill for those families who own a home and a $500 increase in the income tax credit for families who rent.

According to Bill Zimmerman, political director of Voter Revolt and architect of the new and certain-to-be-explosive measure, the proposition would raise $9.4 billion in new taxes. Even by California standards, this is a huge amount, almost one-fifth of the current state budget.

Roughly half of the new tax revenue would be used to offset the homeowner and renter tax reductions. The other half, Zimmerman said, would be divided between state and local governments to try and stop what he called a “deteriorating quality of life in California.”

Homes, commercial property and businesses currently are taxed at 1% of the assessed value. Increases in assessed value are limited to no more than 2% a year, except when property is sold. In that case, it is reassessed at market rate.

The Voter Revolt proposal would establish a business property tax rate of 2.2% of assessed value. And it would allow taxable value to be reassessed as much as 5% a year.

Because business and residential taxes would be “split,” the proposal is known in governmental circles as a “split-roll” proposition. It is an idea that liberals have kicked around for years but which has gotten nowhere because of fierce business opposition.

“Our view is that business realized two-thirds of the benefits of Proposition 13,” Zimmerman said. “And while homeowners deserved the protections they got, business received too big of a break. And that break has been translated into a sharp decline in the standard of living and the level of services in California.”

Business leaders barely got word of the proposal before hitting the ceiling.

Proposal Called Radical

Richard P. Simpson, executive vice president of the California Taxpayers’ Assn., dispatched a bulletin to his members warning that the split-roll measure “could be the most radical proposal ever turned loose on the California electorate should it reach the ballot.”

The group vowed “an all-out campaign to defeat the measure if it qualifies.”

Ever since Voter Revolt and its chief endorser, Ralph Nader, overcame the insurance industry and trial lawyers in California’s most expensive campaign ever, it has had an eye on the next election. Last December the organization formed committees to study and devise a list of recommended ballot initiatives for the June, 1990, election.

Interest in these other activities increased last Thursday when the state Supreme Court upheld many provisions of Proposition 103.

Various Voter Revolt officials have been pondering initiatives on subjects of health insurance, pesticide protections and children in poverty as well as the split-roll property tax. So far, though, only the property tax measure has been fashioned into a final draft and submitted to the attorney general for official review and title, the first step before setting about collecting the nearly 600,000 signatures needed to qualify for the ballot.

Voter Revolt said it will make an official announcement of its next political moves soon.

For the short run, leaders of the organization said its energies will remain devoted to overseeing developments in the implementation of Proposition 103, which is designed to cut rates and institute strict state regulation of the insurance industry. Additionally, the organization promises to be active in the 1990 campaign for the new office of state insurance commissioner, which also was created by the proposition.

Work Just Begins

But like others who have been successful at making important law through California’s initiative process, Voter Revolt has come to view its success as just a beginning, not the conclusion. Before Zimmerman and Voter Revolt chairman Harvey Rosenfield were such memorable predecessors as Paul Gann and the late Howard Jarvis, who teamed up on Proposition 13. A host of others have followed similar paths, although with less success.

Zimmerman, a former anti-war activist who has been a campaign manager for liberal candidates throughout the country, has long dreamed of building a permanent grass-roots voter movement in California using the initiative process.

His split-roll measure would earmark $2 billion per year of new business taxes to a state program for affordable housing and homelessness. Of this, he said, $400 million a year “would be devoted to bringing people out of homelessness and into mainstream of society.”

Another $400 million would be used for no-interest, deferred payment loans to first-time home buyers. Another chunk of $1.2 billion would be used to construct and rehabilitate low- and moderate-income housing.

By Zimmerman’s calculation, that would leave about $2.4 billion a year. This would be divided up among cities and counties and school districts “to make up for the shortfall in their funding that results from tax breaks for business under Proposition 13,” Zimmerman said. Local officials would have the discretion how to spend the money.

Business Equipment Exemption

Voter Revolt, anticipating counter-arguments that its proposal would harm the small businesses of California, is including a provision to exempt the first $100,000 of business equipment from all property taxes.

This is not expected to attract much business support, however. And neither is Zimmerman’s argument that even with an increase in taxes to 2.2% of assessed value, businesses will still pay 0.5% less on the average than they did before Proposition 13.

But Zimmerman said he did not want to run an anti-business campaign like the one Voter Revolt ran against the insurance companies. Instead, he said he would try and make what he called California’s thinly stretched government services the issue in the campaign.

“With insurance, we had an opponent that everyone loved to hate,” he said. “I don’t think there is a great deal of public anger right now at the business community for not paying their fair share of taxes.

“But there is (a) perception that people are not getting what they deserve from local government. So rather than focusing public anger at an enemy that is not acting in the public interest, we have to focus public attention on problems that are undermining the quality of everyone’s life.”