Will CA Pro. 15 Impact Everyone?
The answer is yes, absolutely.
Thinking that the CA Prop. 15 “Split Roll” tax reform won’t impact average consumers is like doubling the price of cheese and being surprised when pizza becomes more expensive.
CA Prop. 15 only affects rich people, right? Who cares if we raise property taxes on millionaires who own commercial properties? It doesn’t matter if you are a business owner or an average consumer, right?
What voters need to know is the “Split Roll” tax reform will increase expenses for business owners which in turn force price increases for the goods and services they offer.
It’s a very straight forward consequence. A vast majority of the local businesses you love lease commercial space. This includes all your favorite restaurants, bars, nail salons, grocery stores, and basically every business you walk into.
Commercial real estate leases are designed so that business owners (not just landlords) pay their portion of all the commercial building expenses. These expenses include insurance, maintenance, some utilities, and PROPERTY TAXES. If Californians elect to raise real estate property taxes, most leases allow those taxes to be passed through to business owners as they are incurred.
In summary, an increase in commercial property taxes will be borne by the businesses that rent commercial space because the right to pass through increases is already explicitly written into a vast majority of commercial leases.
One of the few business-friendly practices in California is the current system in which property taxes are based on the price you paid for the commercial building. If you bought a retail strip center 30 years ago and held onto it as a long-term investment, your property taxes are not as high as if you bought it last year.
For example, let’s say a Californian bought a retail center in Folsom in 1990. Those property taxes have been increasing slowly over time but largely reflect the price they paid in 1990. Yes on CA Prop. 15 means this building will be reassessed at its’ 2020 value, potentially doubling the property taxes owed.
Unfortunately, the buck doesn’t stop there. The commercial real estate owner whose property tax just doubled has a contractual right to pass building expenses on to their tenants. Every business owner in that retail center then gets a fresh increase in the amount they pay every month as a direct result of Prop. 15.
No on CA Prop. 15 simply continues the same property tax increase protections that Californians have on their own homes. This proposition was designed to make voters think only millionaires will be impacted. Thinking this won’t negatively impact business owners and local consumers is like throwing a boomerang, closing your eyes, and hoping you don’t get smacked in the face. Then imagine you throw one boomerang for every local business you frequent. That’s a lot of boomerangs.
Does anyone think business owners in California have had it too easy in the year 2020? Have you been going out of your way to support your favorite local restaurant? Maybe you’re ordering “to go” or buying gift cards or showing support online. Those small actions are lifesavers for the businesses you love and the people who have poured their lives into them. Yes on CA Prop. 15 is like kicking your favorite local restaurant when they’re already down. Let’s support local business owners instead of voting to raise their expenses.