1. California tax policy: changing the future… Lenny Goldberg California Tax Reform Association www.caltaxreform.org CARA, October 2 2013

2. Where are we now?  Budget pressure relieved  Prop. 30: taxing the rich works  Economic recovery (of sorts)  Realignment: pressure on local governments  Health care  Jails  Redevelopment

3. Local vote requirements  Ballot measures to be put on by legislature: 55% vote  Transportation  Parcel taxes for schools  Local government (police, libraries, etc)  Revisiting “special” taxes  SCA 11 (Hancock): one uniting measure (lesson of 30)  Decisions to be made by June: polling, advocacy efforts between now and then

4. Other tax measures stalled  Oil Severance Tax (Evans, SB 241)  Higher education  No fracking without taxing  Tobacco tax increase  Health care, implement ACA  2/3 for taxes?  Business strategy with Democrats

5. Commercial property tax reform: Movement for change?  Weakest link in Proposition 13  California Calls, academic research (USC/PERE) group of allies (including Housing Ca), working for change  How to sustain longer-term effort— through 2016 at least

6. Commercial property tax: Failure at every level  Economics: taxes new investment, fails to tax windfall land rents, anti-competitive—bad for business and the economy  Law: loophole-ridden, “change of ownership” fails to capture complexity of commercial property ownership, difficult to enforce and track  Land use: promotes speculation and sprawl: bad for environment  Fiscal policy: fails to capture revenue from growth, harms infrastructure, shifts burden to residential: inequitable and inefficient

7. Burden shift to residential property: 55 of 58 counties

10. Bad for Business and Growth (!) Burden on New Development and Investment:  Inflated cost of land: biggest negative for growth  Taxed at full market value, compared to competitors  Taxed at full market value of equipment, plus sales tax  Hostile regulatory climate: fees, exactions, mitigations  Fails to pay for necessary infrastructure

11. Public finance and land use  Infrastructure: Short-circuits virtuous cycle of infrastructure paid for by increasing land values (redevelopment)  Growth: Fails to capture revenues from growth, discouraging/burdening new development (what IS land value, really?)  In-fill halted by land prices inflated by failure to tax. (Oakland examples)  Speculation and sprawl: no cost to holding land off market

12. Loopholes and disparities  Publicly-traded corporations never “change ownership”: Chevron at 1978 values, Yahoo 50x Intel on same land  Easy to avoid change of ownership: Dell, Gallo  Land leases: hotels (e.g. Blackstone/Hilton)  Trusts and LLCs: landholdings  Land vs. buildings: major disparities in land values, less in buildings

13. Simple solutions Periodically Assess non-residential property at market value Re-assess land values first—greatest disparity Eliminate business personal property tax: relief for small business, high-tech Assess oldest properties first: pre-1990 property is roughly 1/3 of the total

14. Results of reform $$$ Billions in Revenue for cities, counties, schools Infrastructure Finance Revitalized (redevelopment for all!) Land values lowered / land use improved Better regulatory environment : Capture rising land values from growth Business equipment tax relief for small business Simpler Tax System Not “Split Roll” but “Smart Roll” Smart Roll = Smart Growth

15. How do we get there? PPIC polling is favorable: 58-34, Republicans evenly split Building blocks  Research Reports: USC/PERE  Local exposure—making it real!  ACCE, PICO, CaCalls, Unions, advocates  Public Education & Organizing  Coalition-Building: outreach  Communications & Polling  Force issue to the table as part of tax reform: 2015 and beyond