Prop. 13 corporate loopholes hurting California taxpayers

President Donald Trump — fresh off House approval of a health care bill that would cut taxes for the wealthy to gut care — is now peddling a tax proposal that would cut corporate taxes by $2.4 trillion over 10 years. The wealthiest corporations would get the overwhelming majority of this, while small businesses would get far less. And like all tax cuts for the wealthy, the people who would end up paying for them are us, the everyday taxpayers, in the form of deep cuts to vital services that we rely on every day.

To make matters worse, those same corporations benefit from a loophole in Proposition 13 that allows them to avoid paying $9 billion per year in taxes. While corporations pay less and less in taxes, our taxes go up. To fight back against corporate giveaways, we need to close the corporate loopholes in Proposition 13 and reaffirm protections for homeowners and renters.

When voters passed Proposition 13, they did so with the intention of protecting homeowners from taxes that could push them out of their homes. Retirees and other people on fixed incomes were in danger of losing the main source of their family’s financial security with the rising cost of property taxes. Proposition 13 regulated property tax increases across the state, which reduced fear for homeowners.

However, Proposition 13 also allowed big corporations to freeze their property taxes by locking their assessed value, as if they are worth what they paid for them nearly 40 years ago. That single act has allowed them to avoid over $9 billion per year in taxes. Who pays for that? We do, in the form of increased income taxes, sales taxes and other taxes that the state needs to make up for the money corporations are taking out of the system.

While this problem has persisted for years, with new threats to federal funding, California has reached a breaking point. Wealthy corporations will receive hundreds of billions of dollars in tax giveaways, and California needs to find a way to fill the gap. Our communities are still recovering from the Great Recession of 2008. Closing the corporate property tax loophole would prevent our fragile economy from nose-diving and driving California into another recession.

Closing the loophole would address unintended consequences that have plagued small businesses for decades without sacrificing our state’s unique commitment to keep residential property taxes low. In fact, the proposed changes in recent proposals have no effect on actual tax rates or residential property taxes.

Beyond the prospects of creating budget stability, by closing the loophole in Proposition 13, California can create a more equitable business landscape, where small businesses can compete. Our economy relies on fair competition, but the commercial property loophole in Proposition 13 institutes harmful barriers to market entry and throws our markets out of balance. Anyone looking to start a business faces an uphill climb against companies that can rely on outdated property assessments to save costs.

Under the current policy, companies that own properties valued at over $5 million reap the most benefit, collecting 75 percent of the tax breaks. The majority of small businesses pay their fair share in taxes, making it difficult to compete with wealthy corporations that reap billions from property tax loopholes. If an equitable economy with fair competition is what we hope to achieve, we should fix the policies that make rich corporations richer on the backs of small businesses and taxpayers.

A proposal in the works would eliminate the burdensome property tax on fixtures and equipment, and delay reassessment on businesses under a certain size until properties are sold. Instead, by providing exemptions for owner-operators and a phase-in period for every company, businesses of all kinds would be able to compete with one another. It’s a win-win for California small businesses and consumers.

Since last year’s election, people across California want to know what they can do to fight back. Here in California, we have a property tax policy that is already everything that big business could ever want: a huge tax giveaway that goes directly to their bottom line. The best thing that Californians can do to fight back is make it fair and take back some of that money funneled to big corporations and use it for our schools, health care and infrastructure.


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