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| System Failure: California’s Loophole-Ridden Commercial Property Tax California Tax Reform Association May 2010 As California faces a severe fiscal crisis at the state and local level, all aspects of our tax system, including the property tax, must be examined. This report provides an examination of the property tax system as it applies to commercial property, and provides significant new data which comes to two clear and related conclusions: 1. In virtually every county, commercial property is paying a far smaller share of the property tax since Proposition 13 passed in 1978. 2. Commercial property is able to exploit huge loopholes in the law to avoid reassessment upon change in ownership. The first part of the report, “Who Pays the Property Tax” provides county-by-county data on the changing shares of the property tax between residential and non-residential property. It is based in part on newly-discovered county survey data reported over many years to the Board of Equalization (BOE) which to our knowledge has never before been examined and utilized, and in part on data provided by county assessors, some of whom have substantial records going back in time. The data is consistent throughout the state: in virtually every county in the state, the share of the property tax borne by residential property has increased since the passage of Proposition 13 in 1978, while the share of the property tax borne by non-residential property has decreased. Some examples: in Contra Costa County, the residential share of the property tax went from 48% to 73%. In Santa Clara, the residential share went from 50% to 64%, despite massive industrial/commercial growth. In Los Angeles, it went from 53% to 69%. In Orange, it went from 59% to 72%. |