Commercial property loophole in Prop 13 under attack

10:00 AM, Mar 13, 2012   |    comments
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SACRAMENTO, CA - A lot of California homeowners covet Proposition 13, the landmark voter-approved law that limits how much property taxes go up.

But some critics believe commercial building and land owners are taking advantage of a loophole that lets their property taxes be re-assessed only when a new owner acquires more than 50 percent stake ... leaving schools and local governments struggling to pay for basic needs.

They say closing that loophole would generate $9 billion a year.

"What we do is blind our eyes from looking at this hole right in the middle of our tax system," said Lenny Goldberg with the California Tax Reform Association.

A new report by the California Tax Reform Association gives the example of Silicon Valley - how some long-time companies barely pay $1,000 an acre, while newer companies pay $58,000 an acre.

"How could the richest corporations in the world be paying virtually nothing on some of the most valuable property in the world?" Goldberg wants to know.

Pro-business groups say it would be unfair to change the commercial end of Prop 13. They point to another report by the Davenport Institute at Pepperdine University which found increasing property taxes on businesses by $6 billion would kill 400,000 jobs in the first five years.

"Why whould you want to put a huge additional tax burden on businesses when they're already struggling?" said David Doerr with the California Taxpayers Association. "How many businesses have already gone out of business in this state?"

Any talk of changing Prop13 is almost unheard of. It's considered a sacred cow in political circles because it's credited with keep seniors in their homes and according to the Howard Jarvis Taxpayers Association, the law has saved Californians more than $500 billion in its 33 years in existence.

One economist says no other state has a Prop 13 and therefore it should be repealed.

"I can't think of one reason in the world why Prop 13 should exist," said Chris Thornberg with Beacon Economics. "I think it's an awful regressive tax. Yes, it's the political third rail."

Nannette Miranda


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