Two Years After Voters Said No, Special Interests Try Again to Pass Split Roll
Not quite a year ago, California voters rejected a ballot measure that would have partially unwound Proposition 13, the landmark initiative that set off an “entrepreneurial and commercial explosion” and “a second California gold rush.” Supporters of the “split roll,” a tax regime in which residential properties retain their Prop. 13 protections but others don’t, apparently want another bite at what’s so far been a forbidden fruit. According to the California Apartment Association, “organized labor, specifically Service Employees International Union-United Healthcare Workers West,” has filed paperwork with the state attorney general’s office to put another split roll measure before voters in the fall of 2022.
The previous effort to undermine Prop. 13 would have split real property into two subdivisions. Residential properties would have continued to be taxed the way they have been since the measure went into effect in 1979, while commercial and industrial properties would no longer have been covered and therefore taxed at higher rates. The added revenue, from a $12 billion tax hike, was supposed to be dedicated to education. Voters rejected Proposition 15 by a 52-48 margin in last fall’s general election.
From its current title, the “Housing Affordability and Tax Cut Act of 2022,” to a number of its provisions, the measure includes a number of sweeteners to make it more palatable – or misleading – to voters. It appears to increase the homeowners’ tax exemption, offer an associated renters’ credit, and streamline the homebuilding process. All of which can be achieved legislatively on their own. Gutting Prop. 13 is not required.
But using other people’s money to further a political agenda is a stubborn habit that never rests. Therefore, the follow-up effort. The Howard Jarvis Taxpayers Association, founded by Howard Jarvis, who led the Prop. 13 revolt, saw this coming immediately after the 2020 election.
Facts, though, as many have said before, are stubborn, as well. One that creates a particularly high hurdle for tax-’em-high interests is that Prop. 13 is still the “third rail of California politics.” In 2018, on the 40th anniversary of its passage, and just two years before Prop. 15 was turned back, “a majority of Californians (57%) and likely voters (65%)” still felt that 13 “turned out to be mostly a good thing for the state,” according to the Public Policy Institute of California. That same portion said it was mostly good in 2003.
Meanwhile, 23% said it was “mostly a bad thing” in 2018, up two percentage points from 2003.
Targeting businesses for higher property taxes isn’t the most California thing ever. But it’s close. Policymakers at all levels across the state see businesses as reservoirs of dollars to be plundered, and objects to be regulated. When officials think of businesses, they don’t see in their minds private commercial enterprises, they see units of the state to be used to further political agendas.
In their haste to tax and regulate, they miss, or maybe just don’t care about, the harm done to consumers. Businesses will have little choice but to socialize the higher costs of their operations by charging more for their goods and services, “raising the prices on everything we buy,” say Rob Lapsley and Allan Zaremberg, co-chairs of Californians to Stop Higher Property Taxes, “from gasoline to groceries, while also raising our utility and health care bills.” Any business unable to pass on the costs will have to reduce its expenses. This can mean cutting jobs, living with smaller profits, dropping plans to expand, and in some cases eventually going out of business.
The latest split roll attempt might not make it to the ballot next year. But if it does, and this time voters approve it, don’t be surprised when more businesses leave the state. They can take only so much.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.