California voters in November will decide whether to increase property taxes on commercial and industrial land to raise up to an estimated $12 billion annually for public schools and city halls across the state.
The ballot measure contest will pit big city mayors and pro-labor groups against the business community that resist tax increases, particularly during a pandemic-induced recession. Advocates say the state's largest landowners are gaining from a tax loophole that deprives schools and local governments from tax revenue.
California’s secretary of state announced on Friday that the measure became eligible for the ballot after campaigners turned in more than 1 million signatures.
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Mayors of Los Angeles and San Francisco say proceeds will infuse local governments with new funds to spend on K-12 education, community colleges, homelessness and other community needs. But critics, including industry groups representing restaurants, retailers and others, say raising their taxes will further hurt businesses.
"The public employee unions behind the largest property tax increase in state history are willing to spend and do whatever it takes, even if it raises the cost of living for families," Rob Lapsley, president of the California Business Roundtable, said in a statement. "Everything from groceries, fuel, clothing, day care and health care will cost more if this massive tax hike is approved."
Campaigners are running under the banner of "Schools and Communities First" and say the current state of the economy makes their cause more urgent. Gov. Gavin Newsom has proposed billions of dollars in cuts to education spending in order to plug the state's estimated $54.3 billion budget deficit.
The initiative would effectively exclude commercial and industrial land owners from part of a landmark 1978 ballot measure that caps the rate of increase on property taxes for homes, businesses and all other land. Currently, after a property is purchased, its yearly tax bill cannot exceed 1% of the property's value upon sale. Its property tax bill also cannot go up by more than 2% annually.
If the measure passes, property taxes for commercial and industrial land would be charged based on properties' current market value, which would be reassessed every three years.
Alex Stack, a spokesman for the campaign, pushed back on the claim that the measure would raise prices for consumers across the board, citing a recent study from the University of Southern California that said 78% of the revenue would only come from 6% of commercial and industrial properties.
"This is going to affect the top corporations in the state who have been benefiting from corporate tax loopholes," he said. "They're had a free ride for decades."
An estimate by the independent Legislative Analyst's Office found the proposal would raise $7.5 billion to $12 billion annually. About 40% of the funds would go toward schools and the remainder to local government coffers.