News reports indicate that the "split roll" initiative to split commercial Prop. 13 tax policy from residential policy has submitted enough signatures to be on the November ballot. I guess we should be thankful that California law about new taxes says it has to go to a vote of…the people instead of just the politicians. The whole Proposition proposition is a mess, but that is a discussion for another day. This day we have to assess whether reevaluating the market value of commercial property on a frequent interval and taxing it accordingly is a good thing or not.
I touched on this after hearing our assumed new state senator, Josh Becker, throw his weight behind the idea here. But is there more to the story? And does the hidden story involve the Law of Unintended Consequences? Care to guess? Well, the Law of Unintended Consequences is a bit like the Law of Gravity. The SacBee, no enemy of new taxes, just reported this interesting consequence:
County tax collectors are reiterating their opposition to a proposed “split roll” initiative that could raise tax revenue from commercial and industrial property, calling the measure “problematic” and difficult it to implement. The California Assessor’s Association in a letter to lawmakers says tax collectors don’t have the resources to execute the plan, which calls on them to more frequently assess commercial properties worth $3 million or more.
“In my opinion, the property tax measure as written will be impossible for assessors to implement — not just difficult but impossible,” Santa Clara County Assessor Larry Stone said.
Assessors project the changes would cost just over $1 billion to put in place over three years, and would “overwhelm” county assessors’ capabilities. For example, according to an attached analysis commissioned by the Association, Santa Clara County would experience a 12-fold increase in the number of commercial and industrial properties it reassesses annually. “It is expected that similar increases would result in all counties,” the analysis states.
While we might have sympathy for all the tax collectors having to massively grow their empires to implement the law, what about the people paying these new taxes? Most people who have never rented a commercial space or run a small business don't know how that world works. That apparently includes our next state senator. The term to learn is a "triple net lease". I'll let Wikipedia explain it here. If you don't know what it is, you have no business voting for this initiative. Suffice it to say the very same shop owners and restaurants that I have been fretting about (more than usual) for the last two months are the ones who would get shafted by this ballot initiative.
You are going to hear a lot about the budget shortfall, the evil commercial landlords who have been skating by for years, the school budget cuts and whatever else gets thrown against the wall in hopes it sticks. Now is the time to understand who will actually be hurt by the latest tax grab. Full disclosure: I do not now, nor have I ever owned commercial property. That doesn't mean I don't recognize a train wreck in the making.
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