Property taxes in California are strictly capped at 1% of a property’s assessed value and can increase by no more than 2% each year. These rules were put into place in 1978 when voters in the Golden State approved Proposition 13. This greatly limits the amount of revenue that the state government can collect, but efforts to overturn or revise Proposition 13 have all ended in failure. California residents will have a chance to weigh in on the issue again on Nov. 3 when they vote on Proposition 15.
Higher commercial property taxes
Proposition 15, if it is approved, would change the way property taxes are collected in California but only for commercial real estate owners. Residential property owners will continue to pay their property taxes based on the provisions of Proposition 13, but the commercial real estate would be assessed every three years and taxed based on its market value.
Small business exemptions
Supporters of Proposition 15 say that changes to the tax laws in California are needed to address growing budget deficits and provide funding for education and local government. They also point out that the proposition only applies to commercial real estate worth $3 million or more, and businesses with fewer than 50 workers would no longer be required to pay property taxes on commercial assets like equipment and machinery. If passed, Proposition 15 is expected to increase tax revenues in California by between $10 and $12 billion per year.
How the community will adapt
Lawmakers and advocacy groups will continue to look for ways to increase revenues even if Proposition 15 passes. Attorneys familiar with estate law may explain the difference between tax avoidance and tax evasion, and they may help individuals who are concerned about these issues to develop asset-management strategies that comply with the law while limiting their exposure.