Politics & Government

Dan Walters: California’s ‘split roll’ is a debate, not reality

What’s in a word? How about billions of dollars?

Make It Fair is a labor-union-backed organization that wants to change Proposition 13, California’s landmark property tax limit.

It has been circulating a chart claiming that since it passed in 1978, the proportion of property taxes paid on “commercial” property has declined from 45 percent to 28 percent, while “residential” property’s burden has risen from 55 percent to 72 percent.

This seeming disparity is the core of the coalition’s pitch for creating a “split roll” that would preserve Proposition 13’s tax limits for residential property but make commercial properties subject to assessment upgrades and raise their property taxes.

Split-roll legislation, Senate Constitutional Amendment 5, was introduced, but would need votes from at least a few Republican legislators to go before voters, and that makes SCA 5 a nonstarter.

But back to those words “commercial” and “residential.”

Make It Fair and SCA 5 exclude apartments and other rental housing, whether owned by one person or a huge corporation, from their definition of “commercial and industrial” property, resulting in the dramatic shift of relative burdens cited in the chart.

The California Taxpayers Association, largely supported by business groups, offers a different definition of “commercial property” that includes rental housing.

By its definition, commercial property now pays 62 percent of property taxes, with the remaining 38 percent paid by homeowners.

No small amount of money is involved in those definitions.

Owners of all kinds of property shell out about $50 billion a year in property taxes, and a split roll could mean an additional $9 billion – if rental housing is included.

With SCA 5 stalled in the Legislature, Make It Fair folks are really setting the stage for a ballot initiative.

But it’s complicated by concurrent machinations over another effort to extend Proposition 30, the temporary income and sales tax hike approved by voters in 2012.

Proposition 30 generates about $8 billion a year, and its sales tax component, a relatively small part of the measure, ends next year while its income tax portion, which affects the state’s highest-income residents, is scheduled to expire in 2018.

Local government unions are most interested in a split-roll measure to boost property tax revenues while teachers’ unions prefer to have Proposition 30’s income taxes extended.

Were the Proposition 30 extension to go before voters next year, the split-roll campaign would almost certainly be dropped, at least for the time being. There are also other proposals to raise cigarette and oil taxes, plus one to raise taxes on all forms of property above $3 million in value.

Tellingly, although Make It Fair announced its initiative campaign in May, no ballot measure has actually been submitted.

Thus, the split-roll debate is more semantic than real, but that hasn’t stopped the Business Roundtable from mounting an online ad campaign against it.