Sat, Dec

Villaraigosa Dismembers Prop 13 in his “Grand Bargain”

ANALYSIS  - Los Angeles Mayor Antonio Villaraigosa addressed the Sacramento Press Club Tuesday offering a "grand bargain" of revenue increases and tax cuts to fix the fiscal condition of the state but the core of the plan dealt with significant dismantling of Proposition 13.

The 1978 property tax reform measure set a firm property tax rate, and limited yearly property tax increases while requiring a two-thirds vote of the legislature to raise taxes and a two-thirds vote of the people for some local tax increases.

Villaraigosa proposed undoing many parts of the proposition removing business property from property tax protection, lowering the two-thirds vote to simple majority votes for legislative tax increases and lowering the two-thirds vote for local property parcel taxes dedicated to education. Parcel tax increases would be new taxes on both business and residential property.

He also called for a tax on services that could raise $28 billion.

To offset the tax increases in the Grand Bargain, the Los Angeles Mayor suggested reducing the state income taxes 11-percent, considering eliminating the corporation tax and cutting property taxes for homeowners. He estimated "reform of our property tax system as I've described could yield anywhere from $2.1 up to $8 billion dollars a year."

Other takes on Mayor Villaraigosa’s “Prop 13” speech:

● “Villaraigosa Talks Financial Sense; Now it's Brown's Turn”-Steve Lopez
“The Democratic Divide: Action vs. Inaction, Small vs. Big”-Joe Mathews
● “Villaraigosa's Whistle Stop” Katy Grimes

Overall, Villaraigosa's goal was to raise revenue and invest in public services. He said, "Progressives have to start thinking - and acting -big again." A thought about where he might be going with this in a moment.

Villaraigosa argued early in his speech that he was opposed to politics that pitched jobs overboard, but that is exactly what his property tax increases on business will do. The most vulnerable businesses under his plan would be small businesses, which are the engine of the economy.

Small businesses, especially minority owned, live on the margin with thin capitalization. They often sign leases requiring them to pay any tax increases affixed to the property. If property taxes are increased small business owners will have tough choices to make which likely would result in employees laid off or a job left unfilled.

Eliminating corporation taxes will not help small businesses while they are ravaged by a property tax increase, potentially every year. If the mayor proposes to leave "some" of Proposition 13's protections "to homeowners and homeowners alone" businesses may be looking at both yearly reassessments and a property tax rate increase above the current 1-percent.

Such a plan would lead to more job losses, which would not be made up by the tax cut proposals in the plan.

Villaraigosa challenged Governor Jerry Brown, saying, "Governor Brown, I say, we need to have the courage to test the voltage in some of these so-called ‘third rail' issues, beginning with Proposition 13."

He also attacked what he called "Tea Party economics" at work in Washington and Sacramento.

After the speech, he was asked what his political future held. He insisted he was only looking at the present and fighting for reforms. However, his challenge to the governor on Prop 13, his attack on the Tea Party, and his urging Progressives to think big made it easy to imagine that if Governor Brown looks to his left he might find that he has company in the 2014 Democratic primary should he choose to run for re-election.

(Joel Fox is the Editor of Fox & Hounds and President of the Small Business Action Committee. This column was posted first at foxandhoundsdaily.com)    -cw

Tags: Antonio Villaraigosa, Jerry Brown, Prop 13, property tax, business, small business, Progressives

Vol 9 Issue 66
Pub: Aug 19, 2011