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Prop. 15’s property tax provisions prompt debate

California’s major farm groups oppose the proposal to partially repeal a landmark 1978 tax initiative.

Tim Hearden, Western Farm Press

August 11, 2020

4 Min Read
Walnut processing plant
Critics say commercial and industrial property tax increases under California’s Proposition 15 might exempt agricultural land, but not improvements such as processing facilities.Todd Fitchette

Farm groups are lining up against a November ballot measure that seeks to partially repeal California’s landmark 1978 property tax reform initiative.

Proposition 15 would create a constitutional amendment to require commercial and industrial properties to be taxed based on their market value rather than their purchase price, Ballotpedia explains.

The initiative would amount to a partial rollback of 1978’s Proposition 13, which set the property tax at 1 percent at the time of purchase and limited the annual adjustment to the rate of inflation or 2 percent, whichever is lower. The initiative applied to commercial and industrial properties as well as residential.

While proponents say the new measure would exempt properties zoned for commercial agriculture, groups including the California Farm Bureau Federation, Western Growers and the Agricultural Council of California are voicing their opposition.

The groups argue Prop. 15’s language includes “a fatal drafting error” which exposes agricultural “fixtures and improvements” to higher taxes if the measure passes. The nonpartisan Legislative Analyst’s Office and California Assessors Association have confirmed this flaw, they note.

Critics say the measure may exempt the land, but not improvements such as barns or dairy facilities.

“Prop. 15 does not exempt agriculture,” CFBF President Jamie Johansson said. “It hikes taxes on fruit trees, nut trees, grape vines, dairies, irrigation equipment, barns and much more. California’s family farmers were hit hard by the current COVID-19 crisis. Prop. 15’s tax hike on our livelihoods is the last thing we need.”

Helping poor districts

Supporters of Prop. 15 – which consist largely of Democratic politicians, labor unions and advocacy groups – argue that large companies like Disney and Chevron shouldn’t enjoy the same tax breaks as the retired homeowners for whom Prop. 13 was mainly intended.

United Farm Workers co-founder Dolores Huerta contends the Nov. 3 measure will address inequities that poorer school districts face, helping farmworkers’ families and other communities of color.

“Every single student in California will benefit from this measure, but particular importance is paid to underserved communities – additional funding will go toward low-income students, English-learners and foster youth,” Huerta wrote in a San Francisco Chronicle opinion piece. “This, on top of the increased investments that local governments can make in their communities, will go a long way toward supporting our communities most in need.”

While the notion of changing or repealing Prop. 13 has long been seen as a political “third rail,” education and local-government advocates have complained the historic tax-revolt initiative sapped them of needed revenue. According to a Legislative Analyst’s Office report, property tax revenues to local governments dropped by 60 percent in the year after the initiative passed.

Taxes still high

However, California in 2016 still had the 17th highest per-capita property tax revenue in the country, according to the Tax Foundation. By 2012, Californians had the nation’s sixth highest overall tax burden, including the highest marginal income and capital gains tax rate.

Prop. 15 would be phased in beginning in fiscal 2023, the LAO explains. The measure would provide $6.5 billion to $11.5 billion in new funding to local governments and schools, the LAO estimates.

The 2020 initiative would exempt properties whose business owners have $3 million or less in holdings in California and would exempt a small business’ tangible personal property, according to an analysis by Attorney General Xavier Becerra’s office.

But the initiative would create an added burden to farmers and ranchers who are already at a competitive disadvantage against those in other states and countries with far lower tax and regulatory costs, said Dave Puglia, president and chief executive officer of Western Growers.

“Our farmers pay the highest taxes and highest wages in the nation,” Puglia said. “They simply cannot keep bearing ever-increasing taxes and red tape. Californians are proud of our farmers and ranchers and the nutritious and affordable food they produce. Another large tax increase on farmers is not sustainable.”

Farmers and consumers

Emily Rooney, president of the Agricultural Council of California, agrees.

“Prop. 15 is bad for California farmers and bad for California consumers,” she said. “Prop. 15’s taxes on agricultural property aren’t just going to hit farmers – they’re going to land hard on California consumers, many of whom are already struggling with the cost of living in this state.”

The farm groups’ coalition – Family Farmers Against Prop. 15 – is planning a fall campaign to educate voters about what the groups see as the initiative’s impact on farmers and consumer food prices, group representatives said.

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