California tax policy: changing the future…

Lenny Goldberg

California Tax Reform Association

www.caltaxreform.org

CARA, October 2 2013

Where are we now? Budget pressure relieved

Prop. 30: taxing the rich works Economic recovery (of sorts)

Realignment: pressure on local governments Health care Jails Redevelopment

Local vote requirements Ballot measures to be put on by

legislature: 55% vote Transportation Parcel taxes for schools Local government (police, libraries, etc) Revisiting “special” taxes SCA 11 (Hancock): one uniting measure

(lesson of 30) Decisions to be made by June: polling,

advocacy efforts between now and then

Other tax measures stalled Oil Severance Tax (Evans, SB 241)

Higher education No fracking without taxing

Tobacco tax increase Health care, implement ACA

2/3 for taxes? Business strategy with Democrats

Commercial property tax reform: Movement for change?Weakest link in Proposition 13California Calls, academic research (USC/PERE) group of allies (including Housing Ca), working for change

How to sustain longer-term effort—through 2016 at least

Commercial property tax:Failure at every level Economics: taxes new investment, fails to

tax windfall land rents, anti-competitive—bad for business and the economy

Law: loophole-ridden, “change of ownership” fails to capture complexity of commercial property ownership, difficult to enforce and track

Land use: promotes speculation and sprawl: bad for environment

Fiscal policy: fails to capture revenue from growth, harms infrastructure, shifts burden to residential: inequitable and inefficient

Burden shift to residential property: 55 of 58 counties

1975 1980 1985 1990 1995 2000 2005 2009 2011-2012

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

53.37%

62.67%60.52%

62.45%64.81% 66.20%

69.96% 69.09%

75.55%

46.63%

37.33%39.48%

37.55%35.19% 33.80%

30.04% 30.91%

24.45%

Residential %

Non-Residential %

Los Angeles CountyResidential vs. Non-Residential Property

1974-1975 1980-1981 1985-1986 1990-1991 1999-2000 2005-2006 2007-2008 2009-2010 2011-2012 2012-20130%

10%

20%

30%

40%

50%

60%

70%

80%

56% 58%54% 54%

61%63%

65%67%

73%

68%

44% 42% 46% 46%

39%37%

35%33%

27%

32%

San Francisco County Residential vs. Non-Residential Property

Residential % Non-Residential %

Bad for Business and Growth (!)

Burden on New Development and Investment: Inflated cost of land: biggest negative for

growth Taxed at full market value, compared to

competitors Taxed at full market value of equipment,

plus sales tax Hostile regulatory climate: fees, exactions,

mitigations Fails to pay for necessary infrastructure

Public finance and land use Infrastructure: Short-circuits virtuous cycle

of infrastructure paid for by increasing land values (redevelopment)

Growth: Fails to capture revenues from growth, discouraging/burdening new development (what IS land value, really?)

In-fill halted by land prices inflated by failure to tax. (Oakland examples)

Speculation and sprawl: no cost to holding land off market

Loopholes and disparities Publicly-traded corporations never “change

ownership”: Chevron at 1978 values, Yahoo 50x Intel on same land

Easy to avoid change of ownership: Dell, Gallo

Land leases: hotels (e.g. Blackstone/Hilton) Trusts and LLCs: landholdings Land vs. buildings: major disparities in land

values, less in buildings

Simple solutions

Periodically Assess non-residential property

at market value

Re-assess land values first—greatest

disparity

Eliminate business personal property

tax: relief for small business, high-tech

Assess oldest properties first: pre-1990

property is roughly 1/3 of the total

Results of reform$$$ Billions in Revenue for cities, counties,

schoolsInfrastructure Finance Revitalized

(redevelopment for all!)Land values lowered/ land use improvedBetter regulatory environment: Capture

rising land values from growth Business equipment tax relief for small

businessSimpler Tax SystemNot “Split Roll” but “Smart Roll”Smart Roll = Smart Growth

How do we get there? PPIC polling is favorable: 58-34, Republicans evenly split

Building blocks Research Reports: USC/PERE Local exposure—making it real!

ACCE, PICO, CaCalls, Unions, advocates Public Education & Organizing Coalition-Building: outreach Communications & Polling Force issue to the table as part of tax reform:

2015 and beyond