This November, California voters will have a chance to support small farms, small businesses and local communities, while ensuring big, wealthy corporations pay more of their fair share of property taxes. Prop 15 closes a corporate tax loophole that for decades has syphoned billions of dollars desperately needed for our overcrowded schools and local communities. It’s way past time to tip the scales back towards Main Street, to our children, and to our small family farms that feed California and the world.
Why Do Family Farmers Support Prop 15?
The Schools & Communities First ballot measure rightly exempts agricultural properties and small businesses like our family farms. And Prop 15 will increase local funds for schools where farmers and farmworkers send our children. Our rural schools have been shamefully underfunded.
California consistently ranks near the bottom of the list for school funding. Large land-owning corporations and investors use loopholes in California’s tax code to avoid paying property taxes on their real estate profits, while homeowners and small businesses follow the law and pay their full share. That’s just wrong. This tax avoidance robs schools and essential local services of billions of dollars statewide every year, an impact especially hard on rural communities and schools. Our kids deserve better.
Prop 15 Benefits Small Businesses Like Farms
Not only will residential property taxes remain untouched, but Prop 15 also explicitly does not apply to “real property used for commercial agricultural production.” Prop 15 applies only to commercial and industrial real property valued at more than $3 million.
Prop 15 benefits all businesses by creating a new $500,000 tax exemption on personal property, including business equipment and fixtures. And small businesses of less than 50 full-time employees are totally exempt from taxes on personal property. That’s a significant benefit to all small businesses, including our small and mid-sized family farms.
Tell Me More About Closing These Loopholes & Preventing Corporate Tax Dodgers
Prop 15 changes the law to require commercial and industrial properties valued at more than $3 million to be reassessed every three years and require property tax payments based on the current assessed value. Many of these properties currently avoid paying their fair share of property tax by exploiting loopholes that allow them to avoid reassessment when they are sold or change ownership.
According to a recent report, 92% of all new taxes paid under Prop 15 will come from only 10% of the state’s commercial properties. These properties are heavily concentrated in high value areas like San Francisco and Silicon Valley–not the rural and agricultural areas of the state. 25% of these properties haven’t been reassessed in at least 30 years, and fully half haven’t been reassessed in the last 20 years. Prop 15 will generate between $6.5 and $11.5 billion a year from these large property owners, but they will benefit local communities throughout the state: 40% will go to schools and 60% to local governments at a time when the COVID-19 crisis is forcing counties across the state to cut budgets on essential services. For rural communities in particular that don’t have a wealthy tax base this will mean significant increases in locally-controlled funds for improved health and human services, emergency response services, parks, libraries and infrastructure.
Proposition 13, passed in 1978, limits property taxes to 1% of a property’s assessed value at the time it is bought. When that property is sold, let’s say after 15 years, its value is reassessed, and the new owner must pay taxes equal to 1% of the new assessed value, which is probably much higher than it was when last assessed 15 years ago, so the property taxes also are higher. And if you are a homebuyer or a small businessperson buying a storefront building, you dutifully pay the taxes based on the current value of the property when you buy it.
But a number of large corporations and owners of large office buildings have armies of tax and real estate lawyers who have figured out creative ways to structure changes of ownership without triggering a reassessment of the property. Some of the most valuable properties in the state haven’t been reassessed in many years, even though they have changed hands. And schools and local governments have lost billions of dollars due to this tax avoidance. That’s just not fair. It’s not fair to local communities that struggle to provide basic services; it’s not fair to California’s schoolchildren and teachers; and it’s not fair to the millions of California homebuyers and small business owners who pay their fair share under the law.
Some are claiming that this proposition will in fact tax agricultural property and improvements such as orchards, irrigation or milking barns. This simply isn’t true. The authors of this bill made clear: in addition to residential property and ag land, all “real property” used for commercial agricultural production is also
exempt and will continue to be subject to the same property taxation system as it is right now. Unless tax assessors determine that apples trees are industrial or commercial property rather than agricultural property–which would be ludicrous.
That said, we recognize that there are genuine commercial and industrial properties that some farms depend on, such as large winery tasting rooms or a milk processing facility that dairy farms sell to. For those worth more than $3 million, they will see a change in how they’re taxed. In some situations, it’s possible that a few of these costs may be passed on to some of those farms. But while some organizations oppose tax changes across the board, CAFF understands that our society’s most basic functions, such as public schools, require financial resources. Our priorities at CAFF are to ensure that taxes are fair, won’t overburden our small farms and businesses, and provide broad social benefits.
CAFF’s members, primarily small- and mid-sized farmers who sell into local and regional markets, want to see more fairness in the tax code. CAFF members take a holistic approach and care deeply about their community. Our support for Prop 15 is not only for our farmers, but for our communities, our children,and for California’s future.
On behalf of CAFF, serving family farms for over four decades, we urge you to vote YES on Prop 15.