Close the Loophole

The towering case of fraud was yet another unforeseen consequence of Proposition 13. Thirty-three years ago, the specter of indigent grandparents being taxed into the streets led Californians to overwhelmingly approve the ballot measure. Prior to 1978, assessors didn't much care who owned a building — property was appraised yearly and taxed based on that valuation. Prop. 13 changed things with the subtlety of a thunderclap. Property values are now essentially frozen at the year the owner obtained the real estate, and only reassessed when it changes hands. Determining ownership — and when it changes — is paramount.

And after all these years, Assessor Phil Ting admits the city is no less vulnerable. "It would be great to review a lot more properties to determine if we're missing changes of ownership," he says. "But it would be very, very difficult to detect."

In the meantime, society's wealthiest and most powerful — "the 1 percent" in the parlance of those who were until recently encamped in the shadow of One Market Plaza — exploit loopholes in Prop. 13 to grow wealthier and more powerful still. Read more.

Thirty-three years ago, California passed Prop 13 – and it still dominates our political and fiscal realities today. Of course, the right-wing Howard Jarvis Taxpayers Association took advantage of an opening – escalating property taxes that were threatening the homes of seniors, gridlock in Sacramento and an ascendant conservative movement that elected Ronald Reagan two years later. At a different time, they may not have been successful.

So now that the Occupy movement has put “tax the rich” back on the agenda, and a new generation of activists are clamoring to make the 1% pay their fair share, what kind of electoral opportunities do we have in 2012 that will give these protests a legacy? Will this finally be our chance to reform Prop 13, whose impact will be felt for decades? Read more.

The Promise to California Taxpayers, unveiled Wednesday by Carlsbad-based Stop Taxing Us, incorporates the Taxpayer Protection Pledge pushed by Grover Norquist and attaches language addressing two issues near and dear to Californians: Proposition 13 and taxpayer contributions to government employee retirement plans.

The Promise to California Taxpayers co-opts language from Americans for Tax Reform and goes further than the pledge pushed by the Howard Jarvis Taxpayers Association. Both documents have been praised by supporters for adding a layer of accountability to state and national politics and drawn scorn from critics for contributing to the partisan stalemates in Sacramento and Washington. Read more.

In the meantime, the share of the property tax burden borne by homeowners has grown; the part paid by commercial property has continued to go down.

In Santa Clara County, the booming Silicon Valley center of high tech, where the proportions were roughly even in 1978, residential property owners now pay about 65 percent of property taxes; commercial property pays 35 percent.

In Los Angeles County, where residential property owners carried just over half the burden in 1975, they now pay nearly 70 percent of all property taxes. In Contra Costa County, it’s gone from 48-52 in 1970 to 73-27. Read more.

California voters approved Proposition 13 to rein in property taxes that had doubled in 10 years. More than three decades later, that rebellion has mortgaged the state’s future, saddling it with the nation’s highest debt and lowest credit rating.

The measure led to reductions that dropped per-student school spending from seventh to 29th nationally, prompted cities to pursue sprawling retail development to compensate for lost revenue, and pushed the state into budget gridlock, including a $705 million revenue shortfall announced Oct. 10, by requiring two-thirds approval for any tax increase. Read more.

Taken together, these threats could lead to a new budget shortfall of at least $6 billion, which would trigger even more massive disruptions of government functions than already seen. Courtrooms could be shut down by the hundreds, delaying judgments in all manner of cases from divorces to traffic tickets to small claims, large lawsuits and murders. Public universities and colleges would likely have to raise tuition far beyond the 21 percent increase students are paying this fall. There would be further layoffs of police, firefighters, teachers, sewer workers, librarians and many other categories of public employees.

When this happens, it may become time for a hard look at both Proposition 13 itself and its associated enabling regulations. Read more.

The 2008 acquisition of Anheuser-Busch Cos. by Belgium's InBev, a deal worth $52 billion, created the largest beer company in the world.

It also created a potential boon for cash-strapped local governments in California — allowing them a rare chance to reassess the 1,022 acres owned by Anheuser-Busch in California and tax its 14 parcels at current market value.

"Counties are losing millions of dollars on these loopholes, there's no question," San Francisco County Assessor-Recorder Phil Ting said. Read more.

According to a 2010 study by the California Tax Reform Association, the share of property taxes paid by homeowners has climbed in nearly every county since Proposition 13 passed in 1978. In Santa Clara County, the residential share jumped from 50 percent to 64 percent, even as industrial and commercial growth spiked.

The association's study found numerous examples of private equity buyouts, corporate purchases and bank mergers that were structured to avoid reassessment, which is only triggered when 50 percent of a property is purchased by a single owner. So if a business is sold to four people, its assessed value stays low -- as do its property taxes, a luxury homeowners don't get. Closing this nonsensical loophole could bring some $2 billion a year for schools, public health and safety, and provide room to lower residential taxes. Read more.