California votes to maintain property tax code in a rebuke to organized labor

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Organized labor in California lost big during election week after voters rejected Proposition 15, a revamp of the property tax code allowing local governments to reassess commercial and industrial properties every three years.

The decision could possibly save local businesses who were at risk of a tax hike during the COVID-19 pandemic which has already largely depressed the national and state economies leading to untold hardship for business owners.

Proposition 15 struggled to gain even 50% of the vote, falling short at 48 or 500,000 votes short of projected support. In particular, the legislation requires commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value.

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California has capped property tax increases to 2% annually since 1978. However, the change would not have affected residential property owners. Looking at the turnout, it is no surprise that Prop. 15 generated substantial support in Los Angeles and the San Francisco Bay Area which largely voted for Biden.

Surprisingly, San Diego voted against the measure with a healthy 13% margin. But, San Diego also voted for Biden en masse by over 23%, pointing to the interesting response the law change provoked from small businesses.

Opposition to the change was widespread with a large contingent coming from businesses across California. “From day one, we knew that if voters understood the harm this deeply flawed tax hike would impose on California’s economy and its families, farmers and small businesses, voters would reject this ill-advised effort,” said Rob Lapsley, president of the California Business Roundtable and co-chair of the No on Prop 15 campaign.

While proponents of Prop. 15 are disappointed by the results, there is a chance that this issue will return yet again in 2024 or later on. They estimated that the ballot measure if approved and fully implemented, will generate $8 billion to $12.5 billion in annual revenue which will be distributed to specific areas instead of going directly to the California General Fund.  Therefore, in a 60-40 split, local governments and schools will have around  $6.5 billion to $11.5 billion in new funding a year.

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