Split Roll Debate Continues

March 8, 2015 By Joel Fox 3 Comments

While supporters of changing Proposition 13 to increase taxes on commercial property usually focus on raising the tax rate or frequently reassessing property, UCLA Law School professor Kirk Stark has a different idea – broaden the base of business property taxes by reassessing more often but at the same time lower tax rates on property and other business taxes. Stark made the proposal yesterday in Los Angeles at a panel discussion on the split roll that also featured Jon Coupal, president of the Howard Jarvis Taxpayers Association and Gina Rodriquez, Vice-President of the California Taxpayers Association. The event was sponsored by the Bisnow website, which covers people and projects in the commercial real estate business.

Stark suggested reassessing property on a regularly scheduled basis but lowering the 1% tax rate, eliminating property taxes on business equipment and reducing other business taxes. Stark said his goal was to harness the impulse to tweak Proposition 13 and gain sound tax policy rather than ratchet up the tax burden.

However, proponents of the split roll are after more money and lowering a series of other taxes doesn’t fit into the game plan. Nevertheless, Stark’s proposal in another in a line seeking changes to Proposition 13.

Cal-Tax’s Rodriquez argued there was no need to change any aspect of Proposition 13. She said there has been no shift of the property tax burden from commercial property to residential property, citing the fact that residential properties which claim the homeowners exemption saw property taxes increase by 6.8% since Prop. 13 passed compared to commercial property increasing 7.3% over the same period.

Rodriquez added that under Proposition 13 property tax is the most stable tax in the state and it produces growing revenue for local governments.

Jon Coupal from the Howard Jarvis Taxpayers Association agreed, pointing out that assessor officials around the state noted that because of the Proposition 13 tax system, which produces steady rising revenue even during difficult economic times because of the way it functions, counties were spared “horrible damage” during the Great Recession.

Coupal said California government is not starving for revenue, as tax increase proponents would have you believe. He said California has the highest income tax in the nation, the highest sales tax, the highest gas tax even before the inclusion of cap and trade fees and property taxes that are ranked in the top half of all states.

The issue of when a business property changes ownership triggering a reassessment of property under Proposition 13 received much attention during the discussion.

Stark complained that the Prop. 13 system allows legal entities to own commercial property making it difficult to determine a change in ownership. He mentioned the highly publicized case of a Santa Monica hotel purchased by computer entrepreneur Michael Dell, his wife and others without anyone getting 50-percent of the purchase denying a change of ownership reassessment which a court found legal.

Coupal told of a legislative bill authored by two Democrats last session aimed at reigning in abusive transactions under change of ownership statutes such as the Dell case. The bill failed, Coupal said, because public labor unions urged defeat of the bill as they want a full-blown split roll to change Prop. 13, not a corrective fix of the statutes.

Coupal argued there are no loopholes in Prop. 13 as critics charge. Proposition 13 calls for reassessment on change of ownership. The legislature wrote the rules on how that occurs, so legislative statutes are at the center of the change in ownership discussion, not the article put in the constitution by Prop. 13.

Originally published by Fox and Hounds Daily

Joel Fox is editor of Fox & Hounds and President of the Small Business Action Committee.

(Full disclosure, I am a member of Californians to Stop Higher Property Taxes)

Follow Joel Fox on Twitter @1JoelFox1

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Report: CA Remains “Judicial Hellhole”

February 9, 2015 By Tom Scott 1 Comment

California is home to innovation, from advances in the movie industry to the development of the iPad. But not all innovations here are beneficial, and some of the “innovations” of California’s lawyers are nothing but attempts to get large settlements or win large verdicts.

Those innovations are one reason why California was yet again named one of the worst “Judicial Hellholes” in the nation. We’ve all heard about the crazy lawsuits against food manufacturers that are filed here in California, such as lawsuits about a footlong Subway sandwich not measuring exactly one foot. But the Judicial Hellholes report also highlights an especially troubling trend: contingency-fee lawyers prospecting on the backs of taxpayers by using “public nuisance” lawsuits to sue entire industries looking of a big payday.

For years now, California Citizens Against Lawsuit Abuse has been watching the progress of a lawsuit against paint manufacturers who in the early 1900s manufactured paint with lead-based pigments, a product specified for use on government buildings and repeatedly endorsed by federal, state, and local governments until the mid-1970s. In this case, the plaintiffs’ attorneys – who are working on a contingency fee and have profit, not public health as a motive – have creatively alleged that paint manufacturers violated the state’s public nuisance laws, creating a much lower bar for liability and thus a much easier way to make money.

Unfortunately, the judge in this case bought this absurd argument hook, line and sinker, and awarded $1.15 billion to the plaintiffs – of which 17 percent will go to the contingency fee lawyers who took this case on – nearly $200 million. And while the lawyers are laughing all the way to the bank, California’s homeowners will suffer the consequences of this decision. That’s because the decision labels all homes built before 1981 with lead paint inside them in the ten plaintiff cities and counties as “public nuisances,” – a decision that could “precipitate the worst plunge in California home values since the housing crash of 2007,” according to Giuseppe Veneziano, president of the Los Angeles County Boards of Real Estate.

There may be even more far-reaching effects. The judge’s decision in this case requires inspectors to look for evidence of lead paint in pre-1981 homes, forcing occupants to vacate their homes and relocate until safety is restored to the satisfaction of authorities. This ruling will affect 2.6 million homes in Los Angeles County alone, and an estimated 5 million homes statewide.  How long will it take to inspect all those homes? What will the effect be on the value of those homes until inspection and abatement is complete? Will there be a lasting effect on home values even after abatement takes place? These questions remain unanswered but the results could be catastrophic for California homeowners, as well as the local governments that rely on property taxes to provide services.

But those are just minor details to lawyers looking for a payday. In fact the windfall victory has encouraged other lawyers to try to cash in, too. Contingency fee lawyers have convinced two counties in California (Orange and Santa Clara) and Cook County in Illinois to sue the pharmaceutical industry using the same “public nuisance” argument regarding the use of opioid-based drugs.

These lawsuits are textbook examples of one of the biggest problems facing our lawsuit system – it mainly serves the interests of lawyers rather than ordinary people. But it doesn’t have to be this way. It’s up to all of us to take a stand against this abuse of our courts. We need to challenge our elected leaders to take a stand against these brazen attempts to get wealthy through lawsuits. After all, our court should be used to make people whole – not rich.

Originally published on Fox and Hounds Daily

Tom Scott is Executive Director, California Citizens Against Lawsuit Abuse

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Will Prop. 30 Be Extended?

February 1, 2015 By Joel Fox 7 Comments

Governor Jerry Brown’s job approval ratings are sky high in the recent Public Policy Institute of California Poll, which means the fate of Prop 30 could hang on a word from the governor. Brown continues to remind those who want to see Proposition 30 extended or made permanent that he campaigned for a temporarytax increase.

However, supporters of extending the tax will look at the PPIC poll and think they might get the voters on their side. The poll asked if respondents would like to see the tax extended beyond its 2018 expiration date. No length of extension was offered in the poll question. 52% of likely voters favored extension while 43% opposed. The crucial Independent voters in close election contests narrowly supported the idea of an extension, 49% to 45%.

The poll showed 61% of all adults and 58% of likely voters think Jerry Brown is doing a good job. That is a high mark for his second go-around as governor. Not surprisingly, Brown’s approval among Democrats sits at 82%. However, his job performance also gets the nod from 30% of Republicans and 56% of Independents.

Will approval of Brown’s job performance play a role when voters and legislators consider the future of Prop 30?

According to PPIC president and pollster Mark Baldassare, “Of those who favor a Proposition 30 extension, 74 percent approve of Brown as governor, so the two poll responses are highly related. Given his record-high approval numbers at the start of an historic fourth term as governor, Brown’s views on a wide range of fiscal and policy issues including a Proposition 30 tax extension will have an impact on voters’ preferences.”

If Brown insists on repeating that the Prop 30 taxes are temporary and that the budget can be managed without additional taxes, the voters who like the way he is steering the ship likely would sink any attempt to extend Proposition 30.

Brown will also have to weigh if abandoning his oft-stated temporary tax pledge will undercut his popularity.

However, as I noted previously, Brown might look on an extension of the Prop 30 taxes with a new end date as still a temporary tax therefore keeping his campaign promise while the tax is extended.

Alternatively, if a Proposition 30 extension is put on the ballot via the initiative process, Brown may fall back on his position that the people have to decide any tax increase and he will step back and leave the decision up to the voters.

For now, however, considering the poll numbers, the future of Prop 30 seems to rest on how Gov. Brown wants to employ his popularity.

Originally published on Fox and Hounds Daily

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Brown Key to 2016 Tax Measures

December 2, 2014 By Joel Fox Leave a Comment

With the 2014 election finally over, attention is turned to possible tax measures on the 2016 ballot. I previously wrote about groups looking to raise taxes on commercial property, oil extraction, cigarettes, and extending or making permanent the income tax piece of Proposition 30. Marc Lifsher covered similar ground in the Los Angeles Times over the weekend. The Public Policy Institute of California released a poll last night that asked voters about some of the possible tax increases they could face on the ballot.

The key to which major tax measures will advance to the ballot very well could be Governor Jerry Brown.

It may not seem unusual for proponents of tax increase proposals to want a popular, re-elected governor to support their agenda. However, the key to getting Brown on board is not so much for his endorsement but for his influence with certain powerful political players.

During the Proposition 30 campaign, Brown was effective in neutralizing opposition from the business community. While some business leaders grumbled about the tax, and the board of the state Chamber of Commerce had extensive debate over whether to oppose the measure, in the end the business community, particularly big business, generally withheld opposition to Prop 30.

Supporters of proposed tax ballot measures would like to see the same script in 2016.

In the most recent election season, the governor emphasized the Proposition 30 taxes were temporary. He also warned against taking on Proposition 13 and its property tax protections. While Prop 13 was not tested in the new PPIC poll, Prop 30 extension received support from 52% of likely voters while 43% opposed.

Pro-tax advocates will have to convince the governor they have a winning measure. Then they will push the governor to use his influence with the business community to hold fire on whichever measure – or measures – moves forward. This is particularly true with the major tax issues, less so with so called sin taxes on proscribed goods or services such as the tax on cigarettes.

There is also the issue of a major overhaul of the tax system that has support from some reformers. More on this tomorrow.

Any group considering pushing a tax increase in 2016 will have to consider how the governor plans to use his influence on the issue.

This article was originally published on Fox and Hounds Daily

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