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1 Ulrik Boesen, Split Roll Initiative in California Threatens Property Tax Limitations on Commercial Real Estate 1 (2020)

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                            Split Roll Initiative in California

                            Threatens Property Tax Limitations

                            on Commercial Real Estate

FISCAL                      Ulrik Boesen
FACT                        Senior PolicyAnalyst, Excise Taxes
No. 728
Sept. 2020
                            Key   Findings

                                California has one of the nation's least business-friendly tax environments,
                                 ranking 48th on the Tax Foundation's State Business Tax Climate Index, which
                                 measures  tax structure. However, the state's property tax code is a relative
                                 bright spot, with the state ranking 14th on that component of the Index.

                                If approved by California voters on Election Day and fully implemented,
                                 Proposition 15-also known  as The California Schools and Local Communities
                                 Funding Act of 2020-could  see the state drop to 33rd for property taxes on
                                 the Index.

                                In 1978, voters passed Proposition 13, which capped property tax rates
                                 at 1 percent (for both residential and commercial property) and limited
                                 assessment  growth to 2 percent per year.

                                Proposition 15 would introduce a split roll property tax system in California
                                 by changing the assessment regime just for commercial property. If enacted,
                                 the changes are expected to increase the property tax burden on commercial
                                 activity in California by between $8 billion and $12.5 billion annually.

                                Proposition 15 is being offered as a measure to raise taxes on businesses but
                                 much  of the cost will be picked up by consumers through higher prices on
                                 goods  and services.
The Tax Foundation is the nation's
leading independent tax policy - Proposition 15 would add complexity and increase non-neutrality in
research organization. Since 1937,                        com  leit              non-neutralityx oliy
orese   s andxperts        California's property taxes, rather   than correcting the shortcomings of
    thse e ate, anlonrobat  Proposition 13, and would make the state considerably less attractive for
organization.                    business investment.
©2020 Tax Foundation
Distributed under
Creative Commons CC-BY-NC 4.0
Editor, Rachel Shuster
Designer, Dan Carvajal
Tax Foundation
1325 G Street, NW, Suite 950
Washington, DC 20005
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taxfoundation.org

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