There’s a joke about public sector union bosses making the rounds in Sacramento lately: What happens when the California Legislature hands over a blank check to the California Teachers Association (CTA)? It’s returned the next day marked “insufficient.”
No matter that spending on schools is up 36 percent over the last four years, the state budget has increased 25 percent over the last three and the state is running a surplus of nearly $7 billion, it is never enough. The government employee unions are continuing to press for higher taxes and more spending from which they benefit both in terms of money and political power.
Since California already imposes the highest taxes in all 50 states in almost every category except taxes on property – where we rank 19th highest – the obvious target is Proposition 13 which limits annual increases in property taxes. To take on Proposition 13, public unions, including the two major teachers unions and the Service Employees International Union, have joined with some rag-tag groups of Bay Area radicals to create a front group, calling itself “Make It Fair.” The stated goal is to strip Proposition 13 protections away from businesses, including small mom-and-pop stores and residential rentals, thereby creating a “split roll” in order to seize another $9 billion in tax revenue annually.
To undermine support for Proposition 13 — which remains overwhelmingly popular in public opinion polls – Make It Fair attempts to make homeowners feel unjustly burdened. Backers of higher property taxes on business say that Proposition 13 provides commercial property special advantages, but it does not. California has always taxed all real property at the same rate whether residential or business.
The facts are unimportant to the government employee unions. They accuse owners of commercial property of not paying their fair share in property taxes. This ignores studies that show that business property is actually paying a higher percentage of the total property tax than when Proposition 13 passed and that business property is generally assessed at closer to market value than is residential property. This is due to the frequent improvements businesses make to property to remain competitive and these improvements are taxed at current market value.
But if the government employee unions are really only going after owners of commercial property, why should the average homeowner be concerned?
First, those who delude themselves into believing that the appetite of unions for tax dollars will be satiated if we just give in to their demands, should know that California state and local government employees are the highest paid in the nation. They did not become this way because the union leadership were shrinking violets. Once business property is taxed at a higher rate, there is no question that residential property – homeowners – will be the next target. Already union-backed legislation has been introduced in Sacramento to make it easier to increase taxes on homeowners.
Secondly, most homeowners rely on jobs in order to pay their mortgages. If taxes on commercial property, including those on small businesses and residential rental property, are jacked up, so prices and rents will go up as well. Business that can’t increase their prices because of competition from firms located in other states and countries are likely to join the exodus of companies that have already left California. And they will take those jobs with them.
A recent front page story in the Torrance Daily Breeze, “Tractor Firm Kubota Exits Torrance for Texas,” illustrates the point. The report says the firm, a 43-year resident of the community, will be departing along with 180 jobs, and reminds readers that Toyota made a similar announcement last year. This hemorrhaging of jobs is a direct consequence of California’s hostile business climate, and this is before any increase in the property tax.
It would be a mistake to underestimate the negative impact that changes to Proposition 13 would have on the California economy. A study from the Pepperdine University School for Public Policy reveals that a “split roll” would result in the loss of nearly 400,000 jobs and $72 billion in economic activity over five years.
If front groups were required to adhere to truth in labeling standards, the group “Make It Fair” would be compelled to call itself either “Take Our Jobs, Please” or “Make Us Poor.”
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.