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| From the January 19, 2001 print edition |
Recent developments should warn California taxpayers of a growing risk of higher taxes, costlier consumer products and a less competitive climate for California industry to expand and create jobs.
Ironically, an effort to raise property taxes on business is discussed with enthusiasm in some quarters, despite windfall revenue to state and local governments that is producing budget surpluses unmatched in the history of the state.
State spending alone has increased by nearly 50 percent in just three years as a result of revenue growth that far exceeds programmed spending needs.
In the past year, there appears to be growing support from the so-called spending lobby -- local government and public employee unions -- for increased property taxes paid by businesses in the form of a split roll.
Such a move would imperil the state's economy. Collecting more taxes from owners of commercial property in this manner would be the single most damaging tax policy change that could occur in California.
Storm warnings: Here are soundings that point toward increased activity by split-roll advocates:
Lobbyists for public employee unions have vowed to push for higher taxes on business property in 2001, and leaders of a state Senate-Assembly conference committee on local government fiscal reform vowed to pick up where they left off last August, when their agenda included a split roll.
Mr. Leonard said he was not interested in revenge; he was interested in parity of tax burden among homeowners and businesses.
The split roll would be a money machine for government in California. Altering the change-of-ownership rules of business property, to trigger a reassessment when more than half of a company's stock sells, would bring billions of dollars into the coffers of local government.
Potential damage: The problems for Californians, if the Legislature and governor decide to split the roll, are many.
Even the most limited split roll will increase taxes billions of dollars annually. The Governor's Office of Planning and Research, analyzing Proposition 167's split-roll scheme of 1992, said it would boost taxes by up to $2 billion a year, a figure that obviously would be higher today.
The office also found that a split roll would reduce the number of jobs in California by nearly 75,000 within two years, and cause personal income in the state to fall by $11.4 billion. Voters rejected that initiative.
Split-roll property taxes are new hidden taxes on consumers, because businesses will raise prices of products to cover the higher tax. Higher prices on products and services will make California industry less competitive in national and global markets.
Hidden taxes from a split roll will result in larger, more expensive government that is less accountable.
Retirees whose pension funds invest in California industries will see the value of their funds reduced as these businesses become less competitive and less profitable.
Employees who desire to live and work in California will see other states, even other countries, try to entice business operations out of California.
Canada, for example, has used tax incentives to lure considerable movie-making business away from California.
A return to market value assessments will return to the evils of the assessment theory of "highest and best use." Assessors will value many properties on the basis of higher use, with higher taxes forcing the taxpayer to move on.
A return to market value assessments shifts taxes from an objective standard ("sales price") to a subjective one ("assessors' opinion of value"), leading to unfair assessments and more appeals.
A split-roll property tax increase remains a destructive, ill-advised idea.
Larry McCarthy is president of the California Taxpayers' Association in Sacramento.