Editorial: The Real Impact of Proposition 15

  • Share:
September 16, 2020

At a time when California businesses are struggling to stay open Prop 15 imposes a $12.5 billion tax hike that will be the nail in the coffin for many of California businesses. 

Struggling to keep their doors open, afford rent, pay employees, and more, businesses need more economic incentivization to create jobs for the unemployed, not more financial burdens. November 2020’s Proposition 15 will burden businesses and corporations statewide with an additional $12.5 billion in property taxes annually. 

Labeled as the “School and Local Communities Funding Act,” yet contrary to its optimistic alias, Proposition 15 would offset the financial stability of both Californian businesses and residents. Proposing the largest tax increase in state history, Prop 15 would repeal 1978’s Proposition 13, the Tax Limitation Initiative, which has historically kept property taxes moderate and stable. Many businesses rely on Prop 13 to stay alive, contribute to their communities and focus on producing the highest quality products and services for their customers. 

Proposition 15’s split-roll commercial property tax is unsustainable and will hurt the economic prosperity of California businesses, employees, and residents as we know it. During COVID-19, property owners cannot afford additional billions of dollars of tax payments annually when unemployment remains rampant and underperformance is at highs. 

If enacted, Prop 15 will increase taxes on commercial property owners by 25%, translating to long-term revenue loss and pushing away potential California residents and customers who are discouraged by even higher living costs. Not only will all corporations be harmed, but small businesses will be disproportionally impacted. Prop 15 will force them to minimize overhead by cutting working hours, positions, and pay. Thereby reducing workplace productivity and disincentivizing workers to meet targets. 

Local businesses like restaurants, gyms, barbershops, day care centers, grocery stores, and nail salons can all expect to pay higher rent as a result of Prop 15 and these increases will be passed on to the consumers.

Businesses of all sizes will be forced to lay off employees, shut their doors, and pay higher rent to stay afloat –all of which amplify the current economic hardships already faced. Again, prospective Californians will be pushed away from participating in the state economy because of the additional high costs.

Aside from internal business difficulties, the measure’s $12.5 billion-a-year tax hike will force many small businesses to move out of state and raise consumer prices, making them less competitive. Prop 15 is dangerous to California’s economy. 

Even a 2012 study by Pepperdine University’s Davenport Institute supports this idea: a split-roll tax –just like Prop 15– could set California’s economy back by $71.8 billion and 396,345 lost jobs within the first half decade. These are your core jobs needed for economic growth that are at stake.
 
With speculations that coronavirus will linger until the end of 2021, no one is ready for unaffordable, record-high tax increases when Prop 15 begins and completely devastates both commercial/retail spaces and residential communities. In a time where we need to support businesses, California cannot afford another tax hike: one like Prop 15 that will completely devastate the economy for both businesses and residents.

Contact:
Debra Rosen, President & CEO
drosen@sdbusinesschamber.com, (858) 487-1767