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Effort To Revamp California Property Tax System Trails

 In this Sept. 28, 2020 file photo, Laurie Thomas poses outside of her Rose's...

Credit: Associated Press

Above: In this Sept. 28, 2020 file photo, Laurie Thomas poses outside of her Rose's Cafe restaurant, Sept. 28, 2020, in San Francisco.

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UPDATE: 4:30 p.m., Nov. 4, 2020

A ballot measure to partially dismantle California’s longtime system of tying property taxes to the last sales price trailed Wednesday but the outcome remained uncertain.

No votes on Proposition 15 were ahead by 3.5 percentage points with about 11.6 million votes counted, a wider margin than Tuesday night.

The No on Prop 15 campaign wrote supporters on Wednesday that “trends continue to be in our favor” but that the outcome may be unknown for weeks. Supporters kept a low profile after saying Tuesday night they were confident they would prevail as more votes were counted.

The measure would reassess commercial and industrial properties every three years. Residential property would remain under current rules.

Since a 1978 ballot measure — Proposition 13 — sparked a national outcry for tax cuts and helped pave Gov. Ronald Reagan’s path to the White House, California has limited tax increases to 2% a year for inflation until a property is sold. With prices climbing at a much higher rate, taxpayers who have held homes and businesses for many years pay far less than what the market value would determine.

Supporters said the “split-roll” system would go a long way toward fixing inequities that shield wealthy corporations, depriving property tax proceeds for schools and local governments. Opponents called it a massive tax increase that will cripple businesses in a pandemic-wracked economy.

Another ballot measure that would allow homeowners who are 55 and older, disabled or wildfire victims to transfer a primary residence’s tax base to a replacement home was ahead Wednesday. It was also too early to call, with yes votes ahead by about 3 percentage points.

ORIGINAL STORY:

Voters were nearly evenly split on a California ballot measure to partially dismantle the state’s 42-year-old system of tying property taxes to the last sales price, early ballot tabulations Tuesday showed.

Yes votes on Proposition 15 were ahead by about 1 percentage point with more 7 million votes counted. Likely half the votes remained to be counted.

The measure would reassess commercial and industrial properties every three years. Residential property would remain under 1978 rules that limit tax increases to 2% a year until a property is sold.

Since a 1978 ballot measure sparked a national outcry for tax cuts and helped pave Gov. Ronald Reagan’s path to the White House, California has limited tax increases to 2% a year for inflation until a property is sold. With prices climbing at a much higher rate, taxpayers who have held homes and businesses for many years pay far less than what the market value would determine.

Supporters say the “split-roll” system will go a long way toward fixing inequities that shield wealthy corporations, depriving property tax proceeds for schools and local governments.

Opponents call it a massive tax increase that will cripple businesses in a pandemic-wracked economy. Their advertising portrays it as a step toward completely dismantling the system established under 1978's Proposition 13, even though supporters have disavowed plans to change how residential property is assessed.

Both sides have poured tens of millions of dollars into the campaign. Polling predicts a tight race.

Another ballot measure, Proposition 19, would allow homeowners who are 55 and older, disabled or wildfire victims to transfer a primary residence’s tax base to a replacement home. It was also too early to call Tuesday night, with supporters ahead by less than 3 percentage points with more than 7 million votes counted.

A similar measure lost by 20% in 2018, but this time, the California Realtors Association, its main backer, sought to broaden appeal by tightening rules on passing along lower taxes through inherited properties. It is endorsed by business and labor groups, with no organized opposition.

The 1978 tax rules have held enduring and broad popularity among California voters. But backers of Proposition 15 have mounted a formidable challenge by targeting only commercial and industrial properties, with exemptions aimed at small businesses.

The measure would raise $8 billion to $12.5 billion a year. After costs to counties to reassess property and some tax cuts for business equipment, local governments and schools would net $6.5 billion to $11.5 billion a year in a 60-40 split.

Businesses would be exempt if the property owner has $3 million or less worth of commercial property in California. For businesses with fewer than 50 employees that occupy half a building’s space, the changes wouldn't take effect until 2025. For others, they would begin in 2022.

Supporters had raised $56.3 million by Oct. 16, fueled by the California Teachers Association, Service Employees International Union and the Chan Zuckerberg Initiative started by Facebook founder Mark Zuckerberg and wife Priscilla Chan.

Gov. Gavin Newsom endorsed the measure, as did Democratic presidential candidate Joe Biden and his running mate, California Sen. Kamala Harris. Newsom broke with his predecessor, Jerry Brown, who said the 1978 law, enshrined in the state Constitution, is “a sacred doctrine that should never be questioned.”

Opponents had raised $60.9 million as of Oct. 16. They include the California Assessors’ Association, which would be tasked with reassessing properties, the California Farm Bureau and the California Business Roundtable. The measure exempts agricultural land, but opponents say property could be reassessed for improvements, like vineyards and dairies.

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