Prop 13 on commercial property: destroyer of California

Well, one of the destroyers of California, but, no, I’m not kidding.

“The failure to tax commercial property properly is anticompetitive. Companies which compete against each other have wildly different property taxes, not because of their location or value, but because of their ability to avoid reassessment. IBM in Silicon Valley in 2004 was taxed four-tenths of a cent per square foot of land while competitor companies were paying hundreds of times more. Interestingly, the major differences in assessments are on land, not buildings, because buildings are reassessed when they are improved. (Revised for seismic retrofitting in June 2010 with another Prop 13 initiative Ed.) Business property, such as manufacturing equipment, is also taxed at market value: another tax on new investment instead of on the unearned and vastly undertaxed windfall on the land, a public good.”

“. . .”

“Finally, the system results in bad land-use policy. Without rising commercial property tax revenues, localities have strong incentives to seek sales-tax-generating retail outlets. Monrovia, offered the possibility of having an Eastman Kodak research facility or a Costco, chose the Costco because of all the revenue it generated, not the economic development and job opportunities a high-tech research facility might have provided. A retail warehouse surrounded by a parking lot may be a good fiscal choice, but it is bad land use. Similarly, many infill properties are underutilized because their owners have no tax costs and can hold them off the market forever. The system promotes sprawl and land speculation to the detriment of urban development.”
Pages 57 and 58, Remaking California: Reclaiming the Public Good, (ed. R. Jeffrey Lustig) ISBN 978-1-59714-134-5, Heyday Books, San Francisco, 2010.

Yes, yet another book on why California is messed up, possibly doomed, and what might be done to pull it back from the abyss if anyone still cares enough. Anyone?

Full disclosure: I love Costco. They provide good jobs with benefits for their employees and good prices on products for their members. But they are still a warehouse surrounded by parking lots that cause traffic congestion and waste. A research facility would create good jobs and less congestion and less waste, but not as much money for the county, which is a very messed up situation. Commercial Prop 13 doesn’t work. Will someone with power please fix it?

Note: California Crack-up is the other book about why CA is in trouble and what could be done about it.

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