Prop 15: Effort to revamp commercial property taxes in California trails narrowly in early returns

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A ballot measure to partially dismantle California’s longtime system of tying property taxes to the last sales price was trailing narrowly Tuesday with several million votes still to be counted.

No votes on Proposition 15 were ahead by about 2.5 percentage points with 11 million votes counted. It could take days or even a week or more to count enough remaining votes to determine a winner.

The measure would reassess commercial and industrial properties every three years. Residential property would remain under current rules.

Since a 1978 ballot measure — Proposition 13 — sparked a national outcry for tax cuts and helped pave Gov. Ronald Reagan’s path to the White House, California has limited tax increases to 2% a year for inflation until a property is sold. With prices climbing at a much higher rate, taxpayers who have held homes and businesses for many years pay far less than what the market value would determine.

Supporters say the “split-roll” system will go a long way toward fixing inequities that shield wealthy corporations, depriving property tax proceeds for schools and local governments.

Opponents call it a massive tax increase that will cripple businesses in a pandemic-wracked economy. Their advertising portrayed it as a step toward completely dismantling the system established under Proposition 13, even though supporters have disavowed plans to change how residential property is assessed.

Both sides poured tens of millions of dollars into the campaign.

“No on Prop 15 has held a slight lead all night and we continue to be optimistic that growing opposition to Prop 15 seen in recent polls will ultimately drive us to victory when all of the votes are counted,” said Michael Bustamante, a spokesman for the campaign.

Supporters also said they were confident they would prevail as more votes were counted.

“Right now things are tight but no matter the outcome, we have a coalition that has already made history,” said Alma Hernandez, executive director of Service Employees International Union in California.

Another ballot measure, Proposition 19, would allow homeowners who are 55 and older, disabled or wildfire victims to transfer a primary residence’s tax base to a replacement home. It was also too early to call Tuesday night, with supporters ahead by about 3.5 percentage points.

A similar measure lost by 20% in 2018, but this time, the California Realtors Association, its main backer, sought to broaden appeal by tightening rules on passing along lower taxes through inherited properties. It was endorsed by business and labor groups, with no organized opposition.

The 1978 tax rules have held enduring and broad popularity among California voters. But backers of Proposition 15 have mounted a formidable challenge by targeting only commercial and industrial properties, with exemptions aimed at small businesses.

The measure would raise $8 billion to $12.5 billion a year. After costs to counties to reassess property and some tax cuts for business equipment, local governments and schools would net $6.5 billion to $11.5 billion a year in a 60-40 split.

Businesses would be exempt if the property owner has $3 million or less worth of commercial property in California. For businesses with fewer than 50 employees that occupy half a building’s space, the changes wouldn’t take effect until 2025. For others, they would begin in 2022.

Supporters had raised $56.3 million by Oct. 16, fueled by the California Teachers Association, Service Employees International Union and the Chan Zuckerberg Initiative started by Facebook founder Mark Zuckerberg and wife Priscilla Chan.

Gov. Gavin Newsom endorsed the measure, as did Democratic presidential candidate Joe Biden and his running mate, California Sen. Kamala Harris. Newsom broke with his predecessor, Jerry Brown, who said the 1978 law, enshrined in the state Constitution, is “a sacred doctrine that should never be questioned.”

Opponents had raised $60.9 million as of Oct. 16. They include the California Assessors’ Association, which would be tasked with reassessing properties, the California Farm Bureau and the California Business Roundtable. The measure exempts agricultural land, but opponents say property could be reassessed for improvements, like vineyards and dairies.

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