Issue Position: California Tax Reform

Issue Position

Our state tax system is broken and unfair. Our State Government tax revenue comes from three basic sources: Income Taxes, Sales Taxes and Property Taxes. Because these three taxes were unable to supply all revenue necessary to pay for education, police & fire protection, and social services for the poor and disabled, the hated user fees became painfully common-does anyone think it is fair that those in the rural areas have to pay a fire protection fee or parents have to pay a school bus fee to get their children to school? Our State income tax laws are unreasonably complicated and full of unnecessary loop holes.

Proposition 13 has been a great benefit to the people of the State. Since 1975, those who own their home have protection from large increases in their property taxes. It certainly is fair that someone who has lived in their house for years should not be forced to sell that house when they retire or otherwise have a reduced income, because their property taxes have increase to the point of making the house unaffordable. I would not change Proposition 13 for homeowners as I am a true believer in its benefits.

However, I do not see why large commercial properties such as oil refineries should get the same tax break as homeowners. I advocate eliminating the Proposition 13 tax increase restrictions for large commercial property owners. The change can be revenue neutral; any increased tax revenue coming from this change can be used to eliminate user fees such as the fire protection fee or bus fee and also get rid of silly income tax loopholes.

Industrial and commercial properties are rarely owned by individuals, but are owned instead by corporations, LLCs, or partnerships. Over the last 35 years, the revenue generated by property taxes has greatly shifted away from taxes coming from industrial and commercial properties to taxes from residential property instead. That is because residential properties change hands on an average every 7 or so years, resulting in those properties being reassessed to fair market value at the time of sale. But industrial and commercial property owners take advantage of a loophole; the corporation, for example, remains the same record owner of the property but the shareholders owning the corporation change instead, resulting in no reassessment. If you want property taxes to remain low as a buyer, one simply buys the corporate stock instead the real property itself.

Proposition 13 distorts the free market system when it comes to businesses. Normally a business succeeds by making a better or cheaper product or providing more economical or a superior service. But Proposition 13 gives a business that has owned or leased the property for a longer period a cost/tax advantage over competition simply for being older.

Source