Lack of leadership a big obstacle in updating Prop. 13
SACRAMENTO — Are California voters ready yet to change Proposition 13 so that all corporations pay their fair share of property taxes? A new nonpartisan poll indicates they might be.
But a better, more relevant question is whether any state political leader—namely a governor—is courageous enough to lead the charge. Answer: Of course not.
Gov. Jerry Brown told me five years ago, before he was elected to a third term as governor, that “messing with 13 is a big fat loser.” Clearly he hasn’t changed his mind.
That’s despite the fact that Brown currently has political capital to burn, according to the same poll that found voter sentiment for updating the 36-year-old, landmark property tax-cutting initiative.
A survey by the Public Policy Institute of California, released Wednesday night, showed Brown enjoying record popularity, at least for his elder statesman phase in Sacramento.
Brown’s job performance is approved by 60% of likely voters. Only 32% disapprove.
The governor is seeking a fourth term, although he hasn’t announced it. It’s looking like a blowout reelection win.
In a hypothetical fall matchup with hard-right Republican Tim Donnelly, a state assemblyman from the Lake Arrowhead area, Brown runs 36 percentage points ahead—53% to 17%. Another Republican contender, former U.S. Treasury official Neel Kashkari, hadn’t formally announced his candidacy when the survey began.
In the same poll, the Legislature also records relatively decent marks—33% approval among likely voters—especially when compared to Congress’ 15%.
“People right now are thinking that things are going pretty well in California compared to their feelings about Washington,” says Mark Baldassare, the policy institution’s president and pollster.
But it’s conventional wisdom that Brown and the Legislature wouldn’t be faring so well in public opinion if they were tinkering with Prop. 13, the feared “third rail” of California politics. Never mind that this governor—with legislative acquiescence—has been pushing unpopular high-speed rail and getting away with it.
Baldassare’s poll found that 59% of likely voters favor taxing residential and commercial properties differently—a so-called split roll. Even 43% of Republicans are OK with it. The notion is approved by all age and income groups, including homeowners.
But that sentiment has been relatively steady for years, and Baldassare says he’s a political realist. If any group made a serious effort to tweak Prop. 13, it would be bombarded unmercifully by anti-tax zealots and the business lobby.
Old people would be warned of a slippery slope that could result in the assessor taxing them out of their homes—even if residential property was untouched by a Prop. 13 modification.
“It would be a difficult campaign to run,” the pollster says.
Baldassare specifically asked voters about taxing commercial property at its current market value, as it was before Prop. 13 passed in 1978. That measure allowed for significant reassessments only when property changed ownership. And it’s too easy—especially for corporations—to construct purchases of commercial property so that the real estate technically doesn’t change ownership.
For example, a partnership owns an office building. New people buy into the partnership, but if they don’t purchase more than 50%, it doesn’t trigger a reassessment of the real estate. Actually, it’s all very murky and generates a lot of law business.
A classic case was computer magnate Michael Dell’s agreement in 2006 to pay $200 million for the Fairmont Miramar Hotel, a beachfront landmark in Santa Monica. By bringing his wife and two investment advisors into the deal—with no person owning more than 50%—he was able to avoid reassessment and keep the property’s assessed value at $86 million.
The way Prop. 13 is supposed to work—and does for homeowners—taxes are based on 1% of a property’s purchase price and can rise no more than 2% a year.
Because of Prop. 13, the property tax burden has steadily shifted from businesses to homeowners. In Los Angeles County, homeowners used to pay 40% of property taxes. Now they kick in 57%.
Assemblyman Tom Ammiano (D-San Francisco) tried to alter the law last year to assure that business property was reassessed when, in fact, it changed hands. The lawmaker hoped Prop. 13 was no longer “the untouchable third rail,” he told me, but “more like the bad guy with the mustache who has tied California to the rails with the fiscal train wreck coming.”
Not in the state Capitol. Ammiano’s bill barely passed the Assembly, then died in the Senate without a hearing.
He has given up on the legislation.
“The political climate is death for anything that gets close to Prop. 13,” says Ammiano’s spokesman, Carlos Alcala. “This is his last year [because of term limits], and he wants to work on something that can get done.”
Lenny Goldberg, executive director of the California Tax Reform Assn., has been pushing for years to modify Prop. 13 and close the corporate loopholes.
“We’re trying to organize, educate and expose what’s really happening,” he says. “We’re developing data and looking at some of the largest landowners in the state. If it turns out people don’t care, they don’t care.”
“My modest goal is to get it out front and center so people can have a discussion and not avert their eyes.”
The poll shows that voters are willing to be led into updating Prop. 13. Too bad there are no leaders.
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