By Antonio Villaraigosa | Special for CalMatters
As California grapples with one of its worst economic crises in decades, there is little doubt that people are hurting, businesses are suffering, cities and counties are under extraordinary pressure, and our long-term fiscal outlook uncertain.
Despite these challenging times, we Californians have faced difficult circumstances and overcome them, from fires and floods that battered our homes and businesses, to the earthquakes that leveled portions of our cities.
These were circumstances not of our making. Yet today, amidst the challenges of a pandemic, we are confronted with a different kind of challenge that will surely bring with it additional burdens to our already fragile economy in the form of higher taxes — Proposition 15.
I didn’t vote for Prop. 13, the landmark initiative that reigned in property taxes when it was on the ballot more than 40 years ago, and I have long advocated that business properties should be removed from Prop. 13’s protections. But I have always maintained that any repeal be comprehensive, careful and be a part of a wholesale review of our broken tax system.
That, unfortunately, is not what’s before voters in November in the guise of Prop. 15. Tax reform is too big and too important to be legislated at the ballot box. To be clear, there is no doubt that tax reform is needed, but it should be undertaken by the Legislature and a bipartisan solution forged. Absent a legislative fix, we will continue our overreliance on a volatile tax system that creates a year to year cycle of boom or bust.
California should consider the way in which it collects taxes in a manner that protects our most vulnerable, funds education as well as other essential services and safeguards the important contributions that small businesses make each day. Many of these small businesses and the workers they employ have been the hardest hit by the pandemic. Many have closed their doors, others are teetering on the brink of bankruptcy.
Today, California unemployment hovers around 15.5% and will undoubtedly climb as we continue to grapple with COVID-19. In a few months the state’s budget picture went from a rosy $20-plus billion surplus to a bleak deficit upwards of $50 billion. Hard-working men and women across our state — public and private sector unions, small businesses and gig-economy workers — have been hammered by COVID-19 induced shut-downs.
Prior to the pandemic, many theorized that a state “flush with cash” wouldn’t mind peeling off additional tax dollars to fund schools and communities. However, the pandemic has ushered in a harsh new reality.
With a property tax increase in excess of $11.5 billion, the measure will have a crippling impact on the small businesses trying to recover and get their employees back to work. According to a Berkeley Research Group study, another 120,000 private-sector jobs will be lost if Prop. 15 is approved in November.
This poorly drafted tax measure will disproportionately hurt everyday Californians during the worst economic crisis since the 1930s. It will put significant pressure on jobs in general, but private sector union jobs in particular.
One other point we should all be concerned about. Because Prop. 15 raises property taxes, those higher taxes will get passed on to small business tenants, who rent. These businesses, in turn, will pass higher costs on to consumers in the form of increased prices on everything we buy – groceries, fuel, utilities, clothing and health care. California’s cost of living is already among the nation’s highest. Prop. 15 will drive the cost of living even higher. These taxes won’t differentiate between rich or poor, union or non-union households.
As someone who believes that California’s tax system is broken and must be reformed, the Legislature with overwhelming majorities in both houses needs to take the time to analyze what should be changed and remedy it in a way that provides vital resources for schools, cities, counties and essential services. That effort, in turn, will help spur economic growth to return California’s small businesses to where they were pre-COVID-19 so they can innovate, create jobs, generate income and pay taxes to get our economy working again. Prop. 15 isn’t the answer and will only get in the way of California’s much needed recovery.
Antonio Villaraigosa is a former Mayor of Los Angeles and Speaker of the California State Assembly. He wrote this for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.