(June 16, 2015) Two California newspapers editorialized over the weekend opposing SCA 5, a “job killer” bill that seeks to undermine the protections of Proposition 13 by unfairly targeting commercial and industrial property owners and increasing their property taxes by assessing their property based upon current fair market value instead of acquired value. Also voicing opposition were two business association leaders.
The opinion pieces echo the arguments the California Chamber of Commerce has made about this “job killer” bill. In the recent Capitol Report video, released on Friday, CalChamber Policy Advocate Jennifer Barrera explains that the CalChamber opposes SCA 5 because it “is unfair and will impose a discriminatory tax against commercial and industrial property owners that will ultimately harm small businesses with higher rent, consumers with higher prices and workers through potential job loss.”
CalChamber’s analysis of SCA 5 finds that the constitutional amendment would eliminate the stability under Proposition 13 for commercial and industrial property owners and starting in 2018, assess commercial and industrial real property based upon the fair market value of the property as of the date the property tax bill is issued.
In recognition of the significant tax increase this would be for such property owners, SCA 5 proposes a phase-in schedule for payment of this tax with all commercial and industrial property being assessed upon its current fair market value by 2019–2020. Property owners saddled with this huge tax increase would be provided two to three years to pay the taxes. Additionally, property owners who are unfortunate enough to have a 25% increase in the current fair market value of their property compared to the prior assessed value will be exempt from paying those taxes until after five years, at which point the property owner will be liable for all taxes assessed.
Associations Against SCA 5
An op-ed in The Sacramento Bee by Jon Coupal, president of the Howard Jarvis Taxpayers Association, and Rex Hime, president and CEO of the California Business Properties Association, explains that attacking Proposition 13 would hurt businesses and the economy.
Coupal and Hime assert that “this is no time to raise taxes.” The op-ed is quick to point out that “SCA 5 would raise $9 billion — that’s billions of taxpayer dollars in a time when California is seeing a record budget surplus, is able to pay all its bills and store money in the rainy-day fund and still have a multibillion-dollar surplus.”
Coupal and Hime argue that “This massive tax increase is not really about forcing businesses to pay their fair share because they already do. Instead, it is simply a money grab by special interests who want to raise taxes even more than the billions of dollars in new taxes….”
Newspapers Oppose SCA 5
An editorial in The San Diego Union-Tribune takes issue with calling SCA 5 a “fix” because, according to the editorial board, a “Proposition 13 change is a giant tax hike— not a ‘fix.'”
Although SCA 5 authors Senators Loni Hancock (D-Berkeley) and Holly J. Mitchell (D-Los Angeles) declare their bill to be a crucial step to closing a loophole that costs the state money each year, “…the alleged fix would hammer tens of thousands of property owners who play by the rules and don’t game the system — and who employ millions of Californians,” theeditorial board writes.
The Orange County Register shares similar concerns about the effects SCA 5 will have on businesses and the economy.
“Implementing a split-roll property tax system would have significant negative consequences, as higher tax bills will lead to higher business rents and consumer prices,” The Orange County Register editorial board writes. “California is collecting record tax revenues while its businesses strain under burdensome taxes and regulations. Pushing for another $9 billion a year from businesses only shows how out of touch legislators are with reality.”
SCA 5 has been assigned to the Senate Governance and Finance Committee; no hearing date has been set.