Published on California Progress Report (http://www.californiaprogressreport.com/site)

Created 08/18/2010 – 12:42pm

By David Kersten

California’s 32-year failed experiment with minority rule has proven the principal of majority rule is essential to the efficient and effective functioning of the California State Legislature.  

Majority rule is a fundamental principal embodied by the United States Constitution, but something that has been hijacked by the initiative process in California to provide for the tyranny by 1/3 of the population to the detriment of a majority of Californians.

Research undertaken by Kersten Communications has found that in left-leaning academic circles, there is a consensus that Prop. 13’s 2/3 vote requirement needs to be replaced with a majority vote or 55% vote.   Political scientists on the right, on the other hand, support the 2/3 vote requirement because it restrains the size of government.  (Note: right-leaning academics were contacted for this analysis but chose not to comment).   

In California, we allow representatives for 1/3 of the population to thwart the will of the remaining 2/3 of the population on two essential government functions—the passage of a state budget and any tax measure which increases taxes on a single taxpayer.  This principal of minority rule was enshrined in the California Constitution when a majority of voters passed Proposition 13 in 1978.       

Majority rule was utilized by the framers of the United State Consitution to ensure that the wants of the median voter are represented in government, but the reverse is true in California where 1/3 of the population controls the wishes of the other 2/3 of the population on the two most important government functions—the budget and taxes. 

“Right now you can change the rules of the game as Proposition 13 did, with only 50% plus one person.  Most political scientist say if you are going to change the rules of the game that should be hard, you should not make that too easy because that is going to mess things up often,” said Henry E. Brady, professor of public policy and Dean of the Goldman School of Public Policy at the University of California at Berkeley a budget forum hosted by the university last year.

“Most political scientists, including all that I know, say this is just backwards.  We got it backwards,” Brady said.

“The right 45% loves the 2/3 vote requirement because, they believe, it reduces the size of government,” said Roger Noll, professor of economics emeritus at Stanford University.

“You are correct to note that there is a consensus among academics that the 2/3 rule is “backwards,” while conservatives (including conservative academics) oppose this change because it might lead to bigger government,” said Thad Kousser, an associate professor of political science who is spending the 2009-10 year at Stanford University working on California constitutional reform. 

“But I think it is important to note that us lefties don’t support shifting to a majority rule on the budget because it will lead to bigger government—in fact, most of us doubt that it will lead to much higher spending.  I think the major justification is that it allows budget deals to happen more quickly, and for the final deal to represent what the median voter wants.  It’s about representation and the lack of gridlock, rather than a preference for larger government,” Kousser said. 

Bruce Cain, Heller Professor of Political Science at the University of California Berkeley, said a consensus of conservative political scientists would likely “agree in principle that a majority vote is best but do not trust the legislature, and so are reluctant in this instance to favor the majority vote.”

“If we went to a simple majority to raise taxes in all likelihood the Democrats would raise taxes to solve California’s budget problems.  They would over reach.  They would get thrown out of office and the Republicans would have their best chance of gaining a majority in the Legislature,” said University of California Berkeley professor of public policy John Ellwood.  

“Now the Democrats can propose anything because they know that with the Republican veto nothing will pass.  And the Republicans know that they can get away with simply saying no,” Ellwood said, adding that “nothing gets done either way” and we are just stuck with gridlock. 

“The problem is, I’m not sure the voters want it,” Ellwood said, noting that Proposition 56, which proposed a 55% vote for a budget and taxes was handily defeated in the early 2000s. 

Given that the state is in the midst of yet another prolonged budget stalemate, the debate about the 2/3 vote requirement has flared up again as a way to reduce future budget gridlock.  The existence of Proposition 25 on the November ballot, which would lower the legislative vote requirement to pass a state budget from 2/3 to a simple majority, but retain the state’s 2/3 vote requirement for increase taxes, has thrown additional fuel on the fire. 

A minority of Californians will always support the 2/3 vote requirement because it provides them with overrepresentation of their desires when it comes to state spending and taxes.  This does not mean that they are justified in their beliefs–they have simply been spoiled over the last 32 years by being overrepresented by Prop. 13’s 2/3 legislative vote requirement. 

The time has come for the majority of Californians to reassert their desire for adequate political representation, uphold valid principals of majority rule, and pass Prop. 25 on the November ballot.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

This article was written by David Kersten, president of Kersten Communications—a Sacramento-based public policy research firm.  Kersten is an expert in tax, budget, and fiscal issues. 

With the state and local governments facing large budget deficits, a group of community activists and labor and education leaders staged a series of protests on August 10 to deliver a giant $17 billion bill itemizing the ways Wall Street banks are shortchanging California residents and state and local governments. 

The organizers released a report titled, “Wake Up Wall Street: While Californians Must Choose Between Education and Public Services…Wall Street Banks Owe California Billions,” which itemizes the $17 billion owed to California.  The protests, which occurred in Sacramento, Alameda, San Francisco, Santa Clara, Los Angeles, and Fresno counties, were organized by the Service Employees International Union (SEIU) and the Alliance of Californians for Community Empowerment (ACCE).  SEIU and ACCE also authored the report referenced above. 

Kersten Communications provided research support for the report which details how banks and other Wall Street private equity firms have bought major properties in California in recent years, but are not paying the correct amount of property taxes. 

According to a San Francisco Chronicle report, during an August 10 protest at JP Morgan Chase’s offices at 560 Mission Street in San Francisco, protestors demanded to speak with a Chase representative but Chase declined to send a representative to meet with the crowd of approximately 35, whose grievances included unpaid property taxes, the costs to counties associated with blighted residential foreclosures, a decline in small business loans, and lost retirement savings due to reckless investments by financial institutions. 

 “We came here today to get Chase to pay their fair share in taxes…They foreclosed our homes and got government money and put it in their own pockets,” said Dorothy Hicks, a retired nurse from Oakland and member of ACCE, who spoke through a bullhorn outside the downtown San Francisco high-rise, according to the San Francisco Chronicle report. 

“We have all played by the rules…It’s time for banks to do the same,” said demonstrator Veronica Rodriguez out of a bullhorn at an August 10 demonstration in front of a Watsonville Chase bank, according to a report by the Santa Cruz Sentinel.  

Specifically, “under Proposition 13, properties in California should be reassessed at fair market value upon a change in ownership, but loopholes has led to banks skipping out on an estimated hundreds of millions of dollars in property tax revenues,” according to research by Kersten Communications. 

JP Morgan Chase merged with Washington Mutual Bank (WaMu) in 2008 in a deal reportedly worth $1.9 billion, but two years later many WaMu banks and other WaMu assets have still not been reassessed at current property values.  Wells Fargo and Company purchased Wachovia Corp. in 2008 for a reported $15.1 billion in an all stock deal, but many of Wachovia’s California assets have not been reassessed to date.

In a small sampling of properties in just 11 of California’s 58 counties, research provided by Kersten Communications shows that Chase owes an estimated $15.3 million in back taxes to state and local governments.  Statewide, Chase is estimated to owe tens of millions of dollars in back taxes, according to estimates prepared by Kersten Communications. 

A sampling of specific properties owned by Wall Street private equity firms and other corporations are estimated to owe $34.8 million in back taxes.  “These numbers represent just the tip of the iceberg.”  Estimates provided by Kersten Communications show that banks, Wall Street firms and other corporations are conservatively estimated to owe California $51.6 million in just 11 counties for a small sampling of properties.  Statewide, Kersten Communications estimates that banks and corporations currently owe hundreds of millions of dollars in additional property taxes. 

The report also urges banks to “step up to fix the foreclosure crisis” and estimates that the foreclosure crisis has cost California state and local governments $13.9 billion.  “Banks must agree to real and effective loan modification that includes reducing principal; and pay for blight and safety hazards that foreclosures unleash on our neighborhoods.”     

“Big banks like Goldman Sachs, JP Morgan Chase and Bank of America continue to bill taxpayers for millions a year on risky derivatives called “interest rate swap deals,” according to the report.  Since September 2008 banks have profited $1 billion through these deals that have locked local governments in at high interest rates. 

“Before the crisis hit, big banks peddled toxic swap deals to states and cities on the promise that they would be protected against interest rate spikes.  But now that interest rates are near zero, banks are refusing to renegotiate or cancel these deals,” the report states.    The U.S. Department of Justice and Attorney General in California, Florida, and Connecticut are all investigating potentially illegal behavior by the banks in connection with these deals. 

Cities such as Los Angeles, Oakland, and Frenso have filed lawsuits against the banks over interest rate swaps and other municipal derivatives and bank of America has admitted to a criminal violation of antitrust laws.

The report also blames Wall Street’s reckless behavior for devastating Californian’s retirement security.  “Big banks gambled with and lost the retirement savings of hard-working Californians like nurses, college professors, firefighters, and child protection workers.”  Between October 2007 and December 2008, the top 1,000 U.S. pension funds lost $1.75 trillion, nearly are quarter of their value. 

“The losses were no accident,  In several cases, pension funds like the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) have uncovered deceptive and dishonest practices on the part of banks.  CalPERS and CalSTRS have filed class action lawsuits against banks like Bank of America and State Street Corp. to protect retirement security for more than two million Californians,” states the report. 

The report also urges banks to restore small business loans which have been significantly cut back since the financial crisis began in 2008. 

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On May 14, 2010 Governor Arnold Schwarzenegger released is May Revised budget proposal which outlines a series of solutions to close the $19 billion budget gap projected for 2010-11.  To view the proposal click here.   Legislative deliberations on the proposal have already begun.  Below is a list of the various analyses of the Governor’s May revision: 

“The 2010-11 Budget: Overview of the May Revision.”  Legislative Analyst, May 18, 2010.

“Governor Releases May Revision With, As Promised, ‘Absolutely Terrible Cuts,’ No Tax Increases.”  California Budget Project, Updated May 19, 2010. 

“Highlights of the Governor’s May Revisions 2010-11.”  Assembly Budget Committee, May 14, 2010. 

“May Revision Highlights.”  Senate Budget and Fiscal Review Committee, May 14, 2010. 

###

 The California Institute for Federal Policy Research (CIFPR) reports that House and Senate negotiators on May 20, 2010 reached a compromise on the conference agreement to H.R. 4213, the American Jobs and Closing Tax Loopholes Act.  The original legislation, the Tax Extenders Act of 2009, passed the House of Representatives on December 9, 2009.  The Senate passed a similar package, the American Workers, State and Business Relief Act, as an amendment to that bill on March 10, 2010, according to CIFPR.

The House hopes to garner sufficient support for the measure from moderate Democrats to allow it to pass the bill early next week. The Senate will need to find at least one Republican supporter to reach the 60 votes it will need to overcome a filibuster. Leaders of both bodies hope to secure final passage of the bill before the beginning of the Memorial Day recess, which begins on May 28, 2010, according to CIFPR.

Below is a CIFPR summary of the numerous provisions contained in the bill, the cost of which could total in the neighborhood of $200 billion, are the following:

        - extend eligibility for unemployment insurance benefits and COBRA health care tax credits through December 31, 2010;

        - extend the American Recovery and Reinvestment Act small business lending program that eliminates the fees normally charged for loans through the SBA 7(a) and 504 loan programs and increases the government guarantees on 7(a) loans from 75% to 90%;

        - extend the Build America Bonds (BABs) program for two years (through 2012);

        - exclude bonds financing facilities that furnish water and sewage facilities from state volume caps;

        - extend for one year (through 2010) the expensing of costs associated with cleaning up hazardous “brownfield” sites;

        - distribute the Projects of National and Regional Significance (PNRS) and National Corridor Infrastructure Improvement (National Corridor) surface transportation program funding among all States based on each State’s share of FY 2009 highway apportioned funds rather than to only 29 States and Washington, D.C., that had PNRS and National Corridor projects under SAFETEA-LU; the bill would also distribute “additional” highway formula funds (which the bill makes available in lieu of additional Congressionally-designated projects) among all of the highway formula programs rather than among just six formula programs;

        - reinstate for one year (through 2010) the research and development tax credit;

        - extend for one year (through 2010) the designation of certain economically depressed census tracts as Empowerment Zones;

        - support over 300,000 jobs for youth ages 14 to 24 through summer employment programs;

        - expand the Trade Adjustment Assistance for Communities – Community College and Career Training Grant Program to include individuals who are eligible for unemployment insurance, or are likely to be eligible for unemployment insurance, or have exhausted their unemployment insurance;

        - extend for one year (through 2010) the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes;

        - extend for one year (through 2010) the above-the-line tax deduction for qualified education expenses;

        - extend for one year (through 2010) the $250 above-the-line tax deduction for teachers and other school professionals for expenses paid for books, supplies, and other supplementary materials;

        - extend for one year (through 2010) the $1.00 per gallon production tax credit for biodiesel and the small agri-biodiesel producer credit of 10 cents per gallon, and also extend for one year (through 2010) the $1.00 per gallon production tax credit for diesel fuel created from biomass;

        - extend for one year (through 2010) the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States);

        - prevent 20 percent reduction in Medicare physician payment rates in June and allow rates to increase in 2012 and 2013 if spending growth on physician services is within reasonable limits, with an extra allowance for primary and preventive care; and

        - provide a 6-month extension of the temporary 6.2 percent increase in Federal Medicaid Matching Rate (FMAP), as well as the additional percentage points for states with high unemployment.

        Detailed information on the bill can be found at:

http://waysandmeans.house.gov/press/PRArticle.aspx?NewsID=11185 .

By John Howard | 05/07/10 12:00 AM PST

SACRAMENTO
April 27, 2010 11:03am

But spending cuts would not offset the slash in revenue, leading to further budget problems for the state, says David Kersten, founder of Kersten Communications in Sacramento, a public policy research and analysis company that specializes in budget, tax, and fiscal issues.

“When the state’s in a $20 billion deficit, you can’t propose tax cuts on this magnitude when we can’t even pay for what we have right now,” says Mr. Kersten. “Voters should be careful. If it sounds too good to be true, it probably is.”(David Kersten talks about what he found in his analysis in a CVBT Audio Interview. Please left-click on the link below to listen now or right-click to download the MP3 audio file for later listening.)

Both the Poizner and Whitman tax cut plans would increase the state’s structural $20 billion budget deficit by more than $10 billion a year, according to the analysis.Spending cuts to offset that would essentially dismantle state government, Mr. Kersten contends.  He says both tax plans would provide “very marginal” economic benefits to the state at best and only really serve “to benefit the wealthy and ultra rich.

”He contends both candidates “would reap significant savings, likely to be in the millions of dollars range, potentially tens of millions of dollars, in their own tax bills from their proposed reductions in the state capital gains tax.” 

Drilldown

Kersten Communications, Lenny Goldberg and the California  Tax Reform Association have released new research in support of a bill in the California Legislature which would close major loopholes in the California property tax system. 

The research, which is represented in the SF Examiner article below that also appeared in the California Progress Report, was completed by Kersten Communications with funding by the California Tax Reform Association.  Assemblymember Tom Ammiano (D-San Francisco) is carrying AB 2492 which would represent a statutory fix to one of the biggest loopholes in the state’s tax system—the California property tax. 

Additional information releases are planned in the coming weeks and months. 

For more information on the reform effort contact:  research@kerstencommunciations.com.  

With AB 2492, State Would Close a ‘$7.5 Billion’ Annual Corporate Tax Loophole

San Francisco Examiner, March 30, 2010

By Dan Aiello

The idea of a revision to the state’s property tax law – established with passage of Proposition 13 more than three decades ago – is in no way new to Sacramento.

It was born with the post-Prop 13 realization that what came to legally define a commercial property sale was not the same as what traditionally defined a residential property sale and revisionist proponents claim it was that legal definition which created a corporate tax loophole unintended by the overwhelming number of California voters who supported – and still support – the “stable tax” Jarvis-Gann initiative.

The idea to revise Prop 13’s commercial property exemption has been championed by former Senators Quentin Kopp (I-SF) and Martha Escutia (D-LA) over the course of a decade, and more recently by Warren Buffet while acting as Governor Schwarzenegger’s financial advisor and as legislation sponsored by the California Teacher’s Association desperate to turn around the state’s lagging national ranking in per-student spending ratios.

In 2010, Assembly member Tom Ammiano (D-SF) is the new standard bearer for revising the state’s property tax code – which would require voter approval – as he introduces AB 2492, a ‘homeowner-exempt’ split roll revision intended to “close the loophole” created for commercial property owners with the passage of Prop 13.

“We used to have a parity,” between residential and commercial property taxes, Assembly member Ammiano told California Progress Report. “But now, I think we need this reform.”

Ammiano contends that, while he understands that California voters still overwhelmingly support Prop 13, he believes most voters do not realize that the legal definitions of what constitutes a property sale following passage of the initiative created a corporate tax loophole so big that most of the commercial property in the state over the last 30 years has been driven through it, avoiding the same reassessment that occurs when any comparable residential property is sold.

And over time, the avoidance of reassessment by commercial property owners has meant noticeable declines in commercial property tax revenue share in at least two counties.

‘A virtual flip’ in property tax burden

Proponents of AB 2492 claim there has been a profound shift in the tax burden from commercial property to residential homeowners because of the existing commercial property tax loophole created, not by Prop 13, but by the definition of a sale following the initiative’s passage.

In Los Angeles County, in 1979, residential property contributed 40 percent of total property tax revenue. By 2009 residential property’s share increased to 56 percent of all property tax revenue, according to Ammiano’s Communications Director, Quintin Mecke.

Commercial property in Los Angeles County likewise flipped, decreasing from 47 percent of all property tax collected in 1979 to 31 percent today, claims Mecke.

In San Francisco County, residential property owners increased their percentage of property tax revenue from 41 percent in 1979 to 57 percent last year, while commercial property saw a decrease from a 59 percent to a 43 percent in 2009 revenue share, according to the San Francisco Assessor’s office.

Asked if there were any factors that would explain the figures, San Francisco Assessor and “Close the Loophole” advocate, Phillip Ting, pointed out that the city’s population has remained largely stagnant, only increasing by 50,000 residents over the last 60 years, while the ‘Manhattanization of San Francisco’ undertaken by then-Mayor Dianne Feinstein through the late 70’s to mid 80’s, along with continued commercial property growth since – an increase in commercial square footage Ting called “significant,” – should be reflected in an increase in commercial tax revenue and total tax share, not the decrease evidenced today.

When a sale is not a sale

The issue is simple, claims Ting, a proponent of the legislation and the person behind the web site, closetheloophole.com. “The definitions that you and I hold about what defines a sale are much different than the legal definition that has been created following passage of Prop 13,” Ting told CPR.

Ting gave one abstract example where a commercial property sale is not treated the same as a residential property sale.

It is referred to as Legal Entity Ownership. If a property is owned by a legal entity in which four individuals each own a 25 percent interest, then if an individual sells their 25 percent interest in the legal entity to someone else, no reassessment will occur. This is true even if each of the four individuals sell their interests to other persons. Only if one person or entity obtains control (more than 50 percent) will a change in ownership be triggered.

Because commercial property becomes part of a business, the property ownership often transfers with the ownership of the business, but the property itself is not subject to reassessment.

An alarming number of commercial properties fail to meet the legal definition of sale.

Specific examples where sales are not sales

“I just received a letter last week from the Board of Equalization regarding the JP Morgan acquisition of Washington Mutual informing me that the board determined this did not constitute a sale,” said Ting.

According to Ting, the BOE’s determination prevents a statewide reassessment of the hundreds of Washington Mutual locations. That means every Washington Mutual bank statewide will not be reassessed unless individual county assessor’s choose to challenge the BOE findings.

Similar financial institution mergers have left properties legally “unsold,” for purposes of tax reassessment, including The Bank of America – Security Pacific merger, and the Bank of America – Nation’s Bank merger, which included the Bank of America headquarters on California Street.

Doesn’t it strike you as strange that we are giving these huge financial institutions these property tax breaks while the Federal government is giving them huge bail outs?” asked Ting.

Assembly member Ammiano points to the recent sale of Jiffy Lube to Shell Oil. According to Ammiano, none of the Jiffy Lube locations in the state were reassessed, though he believes California’s voters would consider the properties to have sold.

In 2002, Shell Oil Company purchased Pennzoil Quaker State, which owns the Jiffy Lube Franchise, but two San Francisco Jiffy Lube stations have not been reassessed.

According to the San Francisco Assessor’s Office, the Jiffy Lube located at 6099 Geary Blvd. was last reassessed in 1984, 26 years ago, and is listed as being owned by Jiffy Lube International.

The Jiffy Lube located at 2030 Van Ness is listed as being owned by Rosalie S. Anixter in 2008. The owner of the property in 2007 was listed as Sandra Jeanne Hyman Trust. Despite what appears to be a clear sale of the property to a new owner, the property was last assessed 25 years ago, in 1985, and is not considered to have been sold under the legal definition of commercial property sales.

And that, says Ammiano, is just plain wrong.

Ammiano told CPR that while he’s aware the California Chamber of Commerce and other business lobbying organizations have been traditionally opposed to split roll tax revision, he doesn’t see this as a business versus resident fight, and points to the business-to-business disadvantage the current tax loophole gives to independent and small business owners trying to break into any market, like the independent oil changer trying to compete with the Jiffy lube stations.

Ting concurs.

“When you have tax subsidies, they’re generally given to new businesses to help them get started,” says Ting. “We’ve created a huge barrier to new businesses that are at a huge disadvantage competing with businesses not paying half the property tax. And where are these subsidies going?”

Ting says often the subsidy is simply going out of state. “We’ve created a tax structure that’s taken money away from students and given it to large corporations,” Ting told CPR.

CalChamber’s tax guide, which was forwarded to CPR in lieu of an interview with spokesperson Kyla Christofferson, claims it knows.

“Higher property taxes could unfortunately result in higher rents for the thousands of California businesses that lease their commercial space,” Christoffersen said in a March 11, 2008 press release. “This could significantly worsen the already-troubled housing market and state budgetary situation.”

“That isn’t the way the market has been driven, not based on taxes, otherwise you’d see prices all over the place on rents,” responded Ting. “So in some cases that argument has fallen flat on its face.”

CalChamber’s tax guide also threatens that every percent increase in taxes on business will result in loss of 43,000 California jobs.

“People are resorting to scare people about losing jobs,” said Ting. “We’ve transferred wealth from students and teachers to [in many cases out of state] commercial property owners. We are, for the first generation in California history, passing a worse life on to our children, which is what we’ve been doing for the last ten years.”

“We pay half per pupil what New York and New Jersery pay for education. Half,” said Ting.

Business to Business disadvantage

Ammiano cites the tale of two hotels at Fisherman’s Wharf. In 2008, according to the San Francisco Assessor’s Office the Holiday Inn located at 1300 Columbus Avenue in Fisherman’s Wharf was purchased by FJM Wharf Associates LLC. However, according to the San Francisco Assessor’s Office the property has not been reassessed at market value. The property was last reassessed at market value in 1993. The property’s land values for 2007 and 2008 are $15,508,814 and $15,818,990, respectively. A neighboring property across the street, Courtyard by Marriot which was last reassessed at market value in 2005 has a land value of $29,442,154, despite having a much smaller lot 55,688 square feet compared to Holiday Inn’s 81,060 square foot lot.

Revision proponents say they want Prop 13 protected

When passed in 1978, Proposition 13 capped property tax rates at 1 percent of assessed value, and restricted that value from growing more than 2 percent a year.

“Prop 13 passed for a very specific reason, people were losing their homes because they could no longer pay their taxes,” said Ting. “We have to ensure that never happens again.”

According to Ting, that is the reason why AB 2492 specifically exempts residential property from any tax revision.

On May 7, 2009, the Board of Equalization issued a report stating that statewide commercial properties are assessed at 58% of fair market value and San Francisco commercial properties are assessed at 49% of fair market value.

In April 2009 the State Board of Equalization issued a Spilt Roll Tax Revenue Estimate:

In 2006-07, a split roll would have generated an additional $6.7 billion in revenue

In 2008-09, a split roll would have generated an additional $7.5 billion in revenue

CPR requested an interview with Brenda Yee of the Board of Equalization but did not receive a response.

An additional SF Commercial Example:

Retail on the Same Block-

o Macy’s Men’s Store (Union Square)

§ 1995 base year

§ 263,000 sq ft

§ $93,608,263 assessed value (2008 Roll Year)

§ $355 Assessed value per sq ft

versus

o Neiman-Marcus (Union Square)

§ 2006 base year

§ 252,000 sq ft

§ $192,092,520 assessed value (2008 Roll Year)

§ $761 Assessed value per sq ft

Both properties were purchased in the early 1990’s, but Neiman Marcus had new construction done to the old City of Paris department store building, triggering a reassessment.

Ting argues the law is also subject to endless manipulation by the taxpayer, which violates the basic precept of tax policy that tax laws should provide clear and known results to taxpayers.

Buyers can avoid reassessment even if 100% of a property changes hands.

Among the more egregious examples, in one transaction that took place in Napa County in 2001 where 12 shareholders of E&J Gallo Winery acquired the shares owned by approximately 20 shareholders of the Martini Winery, with the name changing and the deed changing. Since no shareholder bought over 50% no reassessment took place.

CalChamber argues that, when taxes must be increased, it prefers a broad based tax, like sales or income, rather than a “tax targeting a specific group of taxpayers,” such as commercial property owners.

Ting disagrees with the CalChamber argument.

“We have one of the highest sales taxes and highest income taxes in the country,” responded Ting. “The sales tax is the most regressive of all taxes.  It targets low to moderate income families, and the lobbyists for low to moderate income families have not been as effective as lobbyists for large corporations.”

“The assessment [of California commercial property] is no longer based on the value of the property,” admitted the San Francisco County Tax Assessor, an issue he believes only worsens over time. Ting cited several cases where the subsidies go to out of state corporations or property owners, not benefiting California at all, including one Massachusetts property owner of a Menlo Park Trader Joe’s.

Ting and his staff admit to a certain amount of frustration over decisions like that made by the BOE regarding JP Morgan, but says, “We are bound by the law.”

(This article appeared today in its entirety at: California Progress Report.)

By a vote of 68-29, the Senate passed a $17.6 billion jobs bill, HR 2847, on March 17, 2010, and the President signed it on March 18th. The bill provides payroll tax exemptions to small businesses for hiring new, formerly unemployed, workers, according to the California Institute for Federal Policy Research. It also includes a $1,000 tax credit for small businesses that keep those new workers on their payrolls for at least a year. The bill also broadens expensing provisions for small businesses, extends the Build America Bonds program, and includes an extension of the Highway Trust Fund. California is expected to receive about $278 million of the $932 million transportation funding made available under the bill.

The Senate originally passed the bill, 70-28, on Feb. 24, waiving the Pay-Go rules. But when the House passed the bill on March 4, 2010, by a vote of 217-201, it made changes to comply with Pay-Go and offset the cost of the bill, necessitating the second Senate vote, according to the California Institute for Federal Policy Research.