28 Aug Will Voters Change Prop 13?

Proposition 13 has been around since 1978, but voters have the chance to potentially change the California property tax initiative in 2020. Currently, Prop 13 treats all California property taxes in an identical manner, but opponents of the measure are calling for it to exclude commercial property. 

The Public Policy Institute of California conducted a poll inquiring about voters’ feelings surrounding Prop 13, and their findings were that 65% of likely voters believe that it has mostly been a good thing for the state. But critics cite the differences in California’s political landscape today versus when the proposition was originally passed more than 40 years ago. 

This has created an opportunity for voters to potentially change Prop 13 come 2020. The speculation is that voters are interested in redesigning tax rules for businesses and creating a split tax roll into homeowners/small businesses and commercial and industrial property owners. State officials will soon review the potential changes to the ballot measure. 

Proposed changes would see county assessors splitting their tax rolls in addition to commercial and industrial property owners, who would be required to pay more in taxes. Homeowners and small businesses would continue to receive full Prop 13 benefits, but one of the biggest changes involves small businesses (those with 50 or fewer employees) who would keep their current low-tax rules as long as they’re valued at $3 million or less. Their tax amount would be adjusted for inflation in the future. 

Today, Prop 13 offers a 1% tax based on the property’s purchase value and annual tax increases of no more than 2%. In the near future, tax rates would stay the same for commercial and industrial property owners; however, they would adjust to the current market value of the real estate in 2022. 

One of the biggest reasons for the renewed focus on Prop 13 is because 2020 is a presidential election year. Proponents believe that it is their best chance for a large voter turnout. With the help of the Service Employees International Union, the California Teachers Association and the California Federation of Teachers, proponents believe they have the support they need to go the distance.

These unions stand to gain a lot if Prop 13 is revised and have the financial means to back the initiative. Schools would receive the majority of the tax revenue estimated at nearly $7 billion each year, and this is in addition to funding that is already received by K-12 schools and community colleges. The hope is that with some of California’s most influential public unions backing changes to Prop 13, voters will be more inclined to approve it. 

For years, critics have argued that corporations are less deserving of the tax break that Prop 13 has provided. Voters will continue to hear arguments from both opponents and proponents of the changes to Prop 13 as the lead up to the 2020 election year continues. 

For assistance with all of your escrow needs, please contact us! Our expert team of escrow officers would love to help in any way possible.