Debunking the Attacks | SCF for California

DEBUNKING THE SCARE TACTICS

THE FACTS: Prop 15 closes corporate property tax
loopholes that don't benefit consumers.

Do corporations exploiting massive tax loopholes pass along savings to consumers? Of course not! They keep every dime of those profits. Requiring corporations to pay their fair share of property taxes does not impact consumer prices because they have to compete with other businesses who have already been paying their fair share.

This has been backed up by some of the world’s leading economists, who wrote a letter explaining why the opposition’s claims have no basis in reality:

“Firms do not reduce prices out of the goodness of their hearts; instead, they set prices at what the market will bear. Large firms that enjoy cost savings over their rivals due to out-of-date tax valuations tend to take the savings as windfall profits rather than pass them on to their customers.”

Since 1978, the residential share of property taxes has skyrocketed from 55% to 72% while the share of property taxes paid by nonresidential commercial property has declined, according to an analysis. When wealthy property owners don’t pay their share, the burden falls on the rest of us. That’s why Prop. 15 maintains all Prop. 13 protections for homeowners and goes a step further by giving them a tax cut.

If the opposition really cared about family budgets they wouldn’t be spending tens of millions on false ads to protect their corporate tax loopholes.

THE FACTS: Prop. 15 will close corporate tax loopholes that benefit those at the very top.

Here’s what the text of Prop. 15 says:

(e) Property taxes on commercial and industrial properties are a principal source of funding for our schools and local communities. While virtually every other state assesses commercial and industrial property based on its fair market value, California allows commercial and industrial property taxes to go many years, even decades, without reassessment. This unusual system is prone to abusive tax avoidance schemes, diverts funds away from schools and local communities, contributes to the shortage of affordable housing, distorts business competition, and disadvantages business start-ups.

(f) California’s under-assessment of commercial and industrial properties is a growing problem. Large investors and corporations, many of whom are from other states and countries, are using a variety of schemes to get around the law and buy and sell properties without being reassessed, costing our schools and local communities billions of dollars.

According to an analysis of Prop. 15, only 10% of the most valuable commercial properties would generate 92% of the revenue.

Objective media reports on the initiative further clarify that that Prop. 15 closes loopholes exploited by big corporations:

KQED: Prop. 15 Would Close a Corporate Tax Loophole

Los Angeles Times: Corporations get big edge in Prop. 13 quirk

Los Angeles Times: Two Prop. 13 defenders decry abuse of loophole by corporations

THE FACTS: Prop. 15 closes tax loopholes for the
biggest, wealthiest corporations – all while giving
tax relief to small businesses and farms.

Here’s what the text of Prop. 15 says:

(m) Thriving small businesses and start-ups are essential to California's economy now and for our future. The property tax on equipment and fixtures discourages new start-ups, small businesses and larger businesses from making new productive investments. By requiring under-assessed large properties to be assessed at fair market value, small businesses can be fully exempted from the property tax on equipment and fixtures and the tax can be substantially reduced for other businesses, removing this disincentive without harm to funding for our schools and local communities.

(2) This measure makes no change to existing laws affecting the taxation or preservation of agricultural land.

A California Budget & Policy Center analysis found that Prop. 15 “could result in tax reductions for more than 4 in 5 of California’s small businesses.”

Moreover, a Beacon Economics report found that “Most claims about Proposition 15’s impacts on small businesses are unfounded ... Prop. 15 will not impact small business renters, including triple net lease tenants.”

The Community Alliance with Family Farmers endorsed Prop. 15, saying it “exempts agricultural properties and small businesses like our family farms. And Prop 15 will increase local funds for schools where farmers and farmworkers send our children.”

THE FACTS: Prop. 15 will result in investments going
towards schools instead of corporate tax loopholes.

Here’s what the text of Prop. 15 says:

(b) Provide for increased and stable revenues for schools, cities, counties, and other local agencies by requiring under-assessed commercial and industrial properties to be assessed based on their fair market value.

Here are the education leaders and organizations who have endorsed Prop. 15:

State Superintendent Tony Thurmond
Parent Teacher Association of California
California Teachers Association
California Federation of Teachers
Community College League of California
Hundreds of local school districts and community college districts throughout California

These headlines reinforce the fact that Prop. 15 will result in more resources for schools:

THE FACTS: Prop. 15 will help reverse

decades of disinvestment that have hit

communities of color hardest.

This is particularly important as our communities have been hardest hit by the pandemic. The initiative mandates that school funding be invested in communities where it’s needed most. Further, Prop. 15 provides new tax relief for small businesses in our communities.

That’s why this initiative is endorsed by racial equity and social justice organizations and other civil rights leaders, such as Dolores Huerta, Rep. Karen Bass, Rev. Dr. William J. Barber II, local NAACP chapters throughout California, Black Lives Matter founders, and more. Click here for a full list of endorsements.

Prop. 15 has never paid someone for their support or to appear in an ad.

In-depth reporting has exposed the opposition for paying a lead spokesperson in their ads:

CalMatters: California NAACP president aids corporate prop campaigns — collects $1.2 million and counting

American Prospect: The Black Leader Taking Corporate Money to Write Phony Newspapers

Learn More about Prop 15's benefits to California's Economy

California Budget & Policy Center: Key Facts About Proposition 15, California’s Commercial Property Taxes, and Revenue for Schools and Local Communities.

According to this analysis, the majority of small businesses in California would see a tax cut under Prop. 15:
Prop. 15 "could result in tax reductions for more than 4 in 5 of California’s small businesses"
“The majority of small businesses would not be affected by the measure’s reassessment provisions but would benefit from the new personal property tax exemptions”

University of California, Santa Cruz: Market Value: How Fair Assessment of California's Commercial Property Values Would Likely Affect Land Use, Urban Development and the Economy.

“Reforming California's property tax structure to tax commercial properties at their market value would boost the economy by generating new revenue, stimulating development, and diversifying industry”
"Our analysis identified broad economic benefits of assessing commercial and industrial properties at fair market value—without changing the system for residential properties."
"Taxing commercial properties at market rates would level the playing field for all landowners and provide a more equitable tax structure for all businesses.”
“The current system subsidizes older businesses that own their property, creating a competitive disadvantage for businesses that lease or have purchased their property more recently."

Beacon Economics: Understanding the Impact of Proposition 15 on Small Businesses in California. The findings of this Beacon Economics study showed that small businesses don’t get any savings passed down to them from corporate landlords who benefit from tax breaks, and Prop. 15 would result in the largest corporations and highest-value properties finally paying their fair share.

“Most claims about Proposition 15’s impacts on small businesses are unfounded ... Prop. 15 will not impact small business renters, including triple net lease tenants”
"The burden of Prop. 15 would fall on the state’s largest corporations and highest-value properties.”
“Commercial rents are driven by location, local market conditions, the nature of a local economy (high-wage areas are associated with higher rents), and building age and size. … For average commercial properties, reassessments do not increase rents. Office buildings have a small relationship between reassessments and rents. Reassessing a 20-year-old office building to current market value could lead to a one-time rent increase of roughly 2%.”
“Properties owned by most small businesses are low-value and therefore shielded by the Prop. 15 exemptions.”

Blue Sky Consulting Group: Concentration of Revenue Generated by Proposition 15. According to this analysis of Prop. 15, only the top 10% of commercial and industrial properties would generate 92% of the revenue – illustrating the fact that a fraction of top corporations avoid paying their fair share:

“Rather than the revenues from the initiative coming fairly evenly from all commercial and industrial properties, reassessment of a very small share of all properties will generate the vast majority of the revenues”
“Reassessing the properties representing 2 percent of all commercial and industrial properties will generate over three-quarters of all of the revenue raised.”
“The large share of revenues coming from a small percentage of commercial properties results in large part from the fact that those properties are the most under-assessed, meaning that they have the largest gap between their assessed and market values.”

Urban Institute: Housing and Land Use Implications of Split-Roll Property Tax Reform in California. An Urban Institute study found that Prop. 15 would incentivize residential development, helping aid in California’s housing shortage

“If passed, Proposition 15 would create incentives for private owners of vacant parcels or those with aging commercial or industrial structures to convert those properties to residential use.”
“In all four California cities, we found more properties eligible to be converted to residential uses than to be rezoned away from them. We also found that financial incentives for owners and developers to build residential housing increase significantly under split roll.”
“In every city, private owners stand to gain more in tax savings by converting opportunity properties to residential use than jurisdictions could gain by rezoning at-risk parcels.”