By Luis Castilla
The world is in the midst of a pandemic and it’s time to plan for the aftermath with updated property taxes.
The state faces the biggest potential change to property taxes in over 40 years if Prop 15 passes. Property tax works like this: A property’s value reflects its property tax. If a property’s value is $300,000 and its tax rate is 1%, its property tax is $3,000.
In 1978, California passed Prop 13, which meant properties had to be taxed based on their original purchase price.
This applies to both commercial and residential properties, rewarding those who remained in their properties longer with bigger tax breaks. If Prop 15, or “Split Roll,” passes, however, residential properties and commercial properties would be taxed separately.
Nothing would change for homeowners, but commercial and industrial properties would be stripped of their Prop 13 protection, taxing them based on their current market value, which could lead to possibly higher taxes.
Small businesses that are independently owned and have fewer than 50 employees would be exempt, though.
Money from the newly collected taxes would go toward the state to supplement its loss in revenue, and counties to aid Prop 15’s own implementation.
The remaining 60% of the funds would go to local governments. The other 40% would go to school district and community colleges through a new Local School and Community College Property Tax Fund.
Community colleges would receive 11% of the funds and other 89% would go to public schools.
Schools and colleges are also required to receive a minimum of $100 for every full-time student.
The money Prop 15 would generate would not come right away, however. It is estimated that full implementation of Prop 15 and its funds will come into place in 2025.
Should Prop 15 pass, between $6.5 billion and $11.5 billion could be generated, with only about 10% of companies paying the majority of taxes. Many companies benefit from the status quo because they took advantage of land development long ago.
Disneyland, for example, pays the same property tax as it did in 1975 while its value has skyrocketed.
Prop 15 will do away with an old rule that benefits longevity over progress.
Companies that can afford to stay afloat during the pandemic can afford to pay their due tax and homeowners and small businesses are exempt, so Prop 15 is the best preparation for a post-pandemic California.
The voter registration deadline for California is Oct. 19. Nov. 3 is election day, but early voter ballots are already being mailed out. Vote-by-mail ballots must be postmarked by Oct. 19.