Split Roll Would Raise Business Property Taxes

As the State of California examines its options for closing its growing budget gap, one solution poses a significant threat to the business community. AB 2492 (Ammiano; D-San Francisco) would create a split roll property tax; a system that would dramatically increase the cost of doing business in California. Businesses already carry an unfair portion of the property tax load, currently paying about two-thirds of all taxes collected in the state. AB 2492 is based on what the California Chamber of Commerce called the “faulty assumption” that the property tax burden has shifted from businesses to homeowners. In fact, the business community’s two-thirds share of the state’s property taxes has been consistent for decades. In an attempt to correct a perceived (and actually non-existent) inequity, the changes proposed by AB 2492 will dig a deeper hole for businesses. The split roll tax removes Proposition 13 protections for employer-owned properties, while maintaining those safeguards for residential. This means that business property tax rates would no longer be capped at 1 percent of assessed value with a limited growth rate of 2 percent per year. In addition, AB 2492 would significantly expand the definition of ownership of a commercial property so that small or partial ownership transfers could trigger a reassessment. This would allow stock sales that total less than 50 percent to potentially raise property taxes. Currently, reassessments are triggered only when more than 50 percent of ownership changes. The new provisions would also require business owners to prove every three years that there has not been a change in ownership. A change in business property taxes now would threaten the fragile beginnings of economic recovery we are starting to see. Lost jobs, reduced wages, increased consumer prices and higher commercial rents would directly result from a split roll tax; setting any hopes of economic improvement back considerably. Since most small businesses rent instead of own, they will be hit particularly hard by the increased rents. These are the businesses that have the least amount of flexibility when it comes to their bottom line, but employ most of the workers in the state. With an unemployment rate drastically higher than the rest of the country, the state cannot afford to lose any additional jobs. California already has an unfriendly reputation when it comes to attracting and retaining businesses, with some of the highest business taxes in the nation. The changes to a split roll tax would make it even more difficult to do business in a state that is continually watching businesses flee its borders. It is time for lawmakers in Sacramento to recognize who drives California’s economy and stop placing obstacles in the way. AB 2492 undermines Proposition 13 protections for businesses and would force commercial property owners to assume even more of the property tax burden. State leaders must understand that they cannot continue to balance budgets on the backs of business owners. Eventually the stress will force businesses to abandon California or close and the state will be left without its most significant revenue generator. Daymond Rice is the chairman of The Valley Industry & Commerce Association (VICA) , widely considered one of the most influential business advocacy organizations in Southern California. With its knowledge of the legislative process and economic issues, VICA’s access to public officials ensures that the San Fernando Valley’s business perspective is heard in the interest of improving our business climate and quality of life.