LOS ANGELES -- A coalition aimed at reforming California's property tax system said the state could raise $6 billion a year by assessing business property at current market value.
In a recent study titled "A Citizen's Guide to Reforming Proposition 13," the California Tax Reform Association cited several ways the state's property tax system should be changed to eliminate "loopholes and inequities."
Under Proposition 13, the property tax-cutting measure approved by voters in 1978, taxes are set at 1% of assessed value, and assessed values can only increase 2% a year until property is sold. Real property is assessed at market value only at the time it changes ownership or when new construction occurs.
The coalition said the current system creates loopholes for business property owners and called for commercial property taxes to be assessed based on current market value. This will raise as much as $6 billion a year for schools and local governments, the report says.
The 132-page study finds that businesses in California have received the bulk of the savings from Proposition 13 and that of the more than $100 billion in savings, $60 billion went to commercial entities. California's business property tax rates as a percentage of market values are among the lowest in the nation, the group said. National median rates are about 1.5%, while California's rates range from 0.5% to 0.7%.
"The biggest flaw in Proposition 13 is the way business property is assessed," said Lenny Goldberg, executive director of the association. "Large corporations are escaping their fair share of property taxes through a huge loophole in Proposition 13. Closing the loophole would eliminate the fiscal squeeze on local governments and schools," he said.
Tax reform leaders hope to spark a grass-roots movement among citizens to reform Proposition 13. Steve Hopcraft, spokesman for the tax reform association, said the group also will work with lawmakers to revamp the property tax system.
"But we're not sure if the Legislature will have the courage to do that," Mr. Hopcraft said. "If not, we may need to go to the ballot."
The coalition report is not the first to track imbalances in Proposition 13. In June, a bipartisan Senate commission concluded that California's property tax system had "substantial inequities" and called for a transition from Proposition 13 to a new system based on market value assessments. In October, the Assembly Office of Research released its own findings on the legal challenges to Proposition 13 and the implications of several of the modification plans.
These proposals are being studied closely in anticipation of a decision from the U.S. Supreme Court on a case challenging the legality of Proposition 13.
"Whether or not the Supreme Court reforms Proposition 13, we think the people of California need to reform Proposition 13," Mr. Hopcraft said.
Earlier this year, the Supreme Court agreed to hear a challenge to Proposition 13 filed by Stephanie Nordlinger, a resident of Baldwin Hills. She said it is unconstitutional for her to pay much higher taxes than her neighbors because her property had been reassessed when she bought it.