So let’s wrap this discussion up with a brief recap… and summary. It is completely obvious to any reasonable person that even though the new, proposed Proposition 15 commercial & industrial property tax on landlords and business property owners is not aimed at consumers per se – at the end of the day, it is consumers who will pay for this new property tax; paying significantly higher prices for normal everyday goods and services.
Consumers that have for some time already been struggling with the high cost of living in the state of California… as have residents in, for example, other states at the top of the list of “most expensive states” list… most expensive American states – such as Hawaii, New York, Washington DC, and Oregon. States that are this costly to live in do not, and we should repeat do not, need property tax hikes, especially at a time like this when state economies are literally crumbling under the weight of a Coronavirus Pandemic, a tsunami of unemployment, now surpassing 42 million jobless claims nationwide, plus a host of other issues.
These costs, in California, encompass some of the steepest taxes in the country, including some of the highest gas, income, and sales taxes. In fact, the California Legislature just passed policies that have resulted in residents paying 48% more for electricity than the rest of the nation. Fact, not opinion.
Adding a new property tax on top of these existing costs will only exacerbate the affordability issue for many Californians. The downside (ironically, there is no upside) of the Proposition 15 business property & industrial facility property tax that Secretary of State Padilla and other powerful political critics of property tax relief in California are not looking at.
We suggest they had better remember we are in the throes of a national Pandemic, with California running particularly high infection rates, and they would do well to start looking at a potentially massive downswing of middle class and working class personal income descent if landlords, business and commercial property owners abruptly lose their ability to use Proposition 13 to avoid property tax reassessment. At the same time, if business properties have been passed down through family members, countless businesses will be impacted in this fashion, losing their ability to keep parents property taxes and parent to child exclusion in California, when taking advantage of Proposition 13 and Proposition 58, working through a loan to an irrevocable trust… a Prop 58 transfer of property.
The great fear is that the next step politicians who oppose Proposition 13 and Prop 58 will take, after opening the door to unraveling property tax relief for businesses, will be to go after property owners’ ability to take advantage of property tax transfer, or the transfer of parents property taxes upon inheriting property taxes in general. The anxiety running through the state concerns fear that critics of 1978 Proposition 13 now pushing a property tax measure called Proposition 15 (formerly entitled Proposition 13 “Split-Roll” tax) will feel free to go after the right to avoid property tax reassessment, or parent to child transfer and parent to child exclusion in California, if Proposition 15 actually passes in November, 2020.
Obviously, this will impact all Californians, raising rents, throwing prices of goods and services throughout the state completely off the map of normalcy. If these folks do not begin looking at this issue more realistically, they are going to step into a deep statewide quagmire of economic quicksand, if this property tax passes in November.
Although politicians on the state level claim that a revised Proposition 15 property tax includes a “small business exemption” that will fix everything… don’t believe it. We suggest you don’t drink the Cool-Aid! This new property tax on commercial property owners in California will be crippling, to most businesses and commercial entities, including landlords, in California. The revised measure supposedly expands the “reassessment exemption” to small business owners with property valued at $3 million or less, up from the initial $2 million threshold. Sounds like double-talk to most of us.
One of “us” being the talented, courageous Rob Gutierrez, President of California Taxpayers Association. Mr. Gutierrez says that these supposed “protections” for small businesses aren’t even close to being strong enough to allow these folks to survive – with thousands of jobs for Californians not able to survive in the bargain! More people on the Unemployment Line.
“Because so many small businesses rent as opposed to own their commercial space… higher property taxes on the buildings they rent space in will of course result in more expensive rent for them”, says Mr. Gutierrez… “What that translates into is higher prices for consumers and brick-and-mortar stores. Dry cleaners, grocers, companies that cannot move, will have to find a way to pass these costs on.”
And as usual, who does this get passed on to? That’s right. Us. The consumers.
Faced with higher property taxes, commercial property owners with leases will assuredly be motivated to pass these increased costs on to their tenants. They’ll have no choice. For example, the owners of shopping centers or strip-malls, with numerous commercial tenants, if unable to avoid property tax reassessment or parent to child exclusion in California, will without question be compelled to increase rents on their commercial and industrial tenants. Next step, prices on goods and services go up literally overnight.
So we can only further assume that adding a new property tax to the already heavy burden carried by residents of this great state will only serve to make current economic challenges only more challenging for regular middle class Californians. There’s no doubt about it. Hence the need for California to keep the property tax system as is… Leaving the status quo alone.