Voters Reject Proposition 15 — A Ballot Question to Partially Dismantle a Cap on Property Taxes

California voters narrowly rejected a ballot question to partially dismantle the state’s 42-year-old cap on property taxes. Proposition 15 failed to reach the majority vote needed to pass on Tuesday night, according to the Associated Press.

Proposition 15, a measure backed by organized labor to fundamentally change the way California calculates property taxes for commercial and industrial real estate and generate revenue for schools and local government services, failed Tuesday night.

Proposition 15 represented a wish by liberal Democrats, ever since the landmark tax-cutting measure Proposition 13 passed in 1978, to create a so-called "split roll" — splitting off commercial and industrial property from residential and farm land for the purpose of calculating taxes.

Currently, all property in California is taxed by the Proposition 13 formula, based on 1% of the purchase price with an annual increase of no more than 2%.

“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, in a statement. “Today’s victory should send a clear message to the proponents and warn all politicians that voters will continue to reject attempts to dismantle Prop 13.”

Supporters of Proposition 15 said the current tax system created by Proposition 13 was sold to voters as a way to protect homeowners, not corporations. They argued that businesses unfairly benefit, in part by taking advantage of a “loophole” that allows them to avoid having property reassessed, even when it’s sold, by limiting ownership of any individual or group to less than 50%.

Proposition 15 would change that, assessing that property more often so that corporations pay their fair share — raising billions of dollars a year for schools and local government services.

"Nobody said it would be easy," said Alex Stack, Yes on 15 spokesman. "California’s challenges are not going anywhere, and this election result has shown that there is strong public demand for closing the corporate tax loopholes which cost our local communities billions every year,” he added.

Critics of Proposition 15, led by California business groups like the Chamber of Commerce and the Business Roundtable, argued that they already pay high taxes and face burdensome regulations in the state. Now, in the middle of a pandemic, when businesses are struggling to survive and unemployment is high, is not the time to raise taxes on them, they said. In their view, Proposition 15 was a money grab by powerful unions that wanted to use the money to pay for their members’ over-priced pensions.

Opponents of Proposition 15 also said if it passed, homeowners would be the next ones targeted for higher taxes, although there is no indication that would really happen.

Proposition 15 was one of the highest-profile propositions on the ballot, with at least $148 million spent — at least $67 million in support and at least $74 million against.