Initiative Update

New Measures Propose Business Property Tax and Income Tax Increases

property tax increase

Two newly filed initiatives seek major tax increases – a property tax increase targeted at business property and an income tax increase on high earners – at a time when the state already is collecting a revenue windfall.

Initiative 21-0023, filed September 23, would impose a 1.2 percent property tax “surcharge” on commercial, residential, industrial, and mixed-use real property – or vacant land – with “full cash value” of $5 million or more, and a lower amount on property valued from $4 million to $5 million. Exemptions are included for commercial agriculture property, protected open spaces, properties restricted by deed for low-income occupants and others.

“No person responsible for paying the surcharge for covered property shall directly pass on the cost of the surcharge to any tenant,” the initiative states.

In an apparent effort to make the measure popular with voters who don’t own property that would be subject to the tax hike, the initiative also would increase the property tax exemption for a principal residence from $7,000 (the amount that has been in place since 1972) to $200,000. There have been several legislative attempts to increase the homeowners’ exemption, but they have failed to gain traction with the Legislature’s majority party.

Additionally, the initiative would provide a renter’s tax credit for income-qualified renters in an amount not less than $2,000 for spouses filing joint returns, heads of household, and surviving spouses, and in an amount not less than $1,000 for others. The amounts would be increased annually for inflation, up to 2 percent per year.

The measure was filed by the Kaufman Legal Group on behalf of Stanley R. Apps. It is not clear whether Apps is associated with any major union or political association with the resources that would be required to mount a successful signature-gathering effort.

The personal income tax measure, Initiative 21-0022, filed September 16 by Max Henderson and Anna Maybach, proposes a 0.75 percent personal income tax on Californians making over $5 million per year – bringing the state’s top PIT rate, already the highest in the nation, to 14.05 percent – to create a new bureaucracy that would allocate funding for technology aimed at creating an early-warning system to detect, prevent, and defeat biological threats before they become pandemics.

The tax hike would remain in place for 10 years.

The initiative, submitted as the “California Pandemic Early Detection and Prevention Act,” would create and fund an independently governed public grantmaking organization within the state treasury. The organization, called the California Pandemic Early Detection and Prevention Institute, would be run by a seven-member board. Five board members would be appointed by the governor, one would be a representative of the California Department of Public Health, and one would be hired to serve as the chief executive officer. The initiative would require the state to provide $10 million from the general fund to initiate the program, to be repaid within two years.

The text of the initiative characterizes the measure as being good for California’s economy, stating: “By enacting this initiative, California will become a global leader in this exciting new area of technology and will serve as a model for the nation and the world while creating thousands of new, well-paid jobs, generating millions of dollars in new tax revenues, and drawing talent and private investment into the state.”

Echoing many of the same arguments used by proponents of recent split-roll property tax and wealth tax proposals, the initiative adds: “While many Californians suffered economically due to the COVID-19 pandemic, many of the wealthiest Californians prospered during the same period. This initiative, therefore, will ask only the wealthiest Californians to pay slightly more in taxes – only on their income over $5 million per year – to help avert the suffering caused to all Californians by future pandemics. The vast majority of Californians will not be impacted by any new tax.”

Proponent Max Henderson holds a board seat for Covid Act Now, a nonprofit organization that provides data about COVID in the United States.

Proponent Anna Maybach works for American for Cures, whose founder and chairman is Robert Klein, author of the successful Proposition 71 stem cell research initiative in 2004. Klein has faced scrutiny from the media that he personally benefitted from the measure. Klein became the first chairman of the California Institute for Regenerative Medicine, which was created by his initiative. Proposition 71 authorized the state to sell $3 billion in general obligation bonds to be repaid with interest over 30 years.

Two other measures were introduced this month:

  • Dissolve the Public Utilities Commission. Initiative 21-0020, filed September 14, would amend the state constitution to abolish the Public Utilities Commission (PUC) and distribute its responsibilities to other state agencies, departments, or boards. The Legislature would be tasked with minimizing displacement of state workers by working to ensure employees obtain similar positions in reassigned agencies. The measure also would establish a Special Wildfire Victims’ Fund in the state treasury to assist victims of wildfires with housing, food, and other basic needs.
  • Voter Verification. Initiative 21-0021, filed September 15 by Carl DeMaio, proposes procedures to increase voting requirements, including requiring voters to present a valid government-issued identification card and mandating that election officials verify that individuals are registered voters. Additionally, the initiative outlines a process intended to increase voting efficiency by, among other things, evaluating and reporting wait times for in-person voting.

Measures cleared to circulate for signatures:

  • Right to a Jury Trial for Child Custody Determinations. Initiative 21-0001 faces a signature-gathering deadline of September 28. The measure, which observers do not expect to qualify for the ballot, would allow parties to demand a jury trial in child dependency and child custody court proceedings as well as dependent-child proceedings. The measure would prohibit a judge from rejecting a jury’s findings. The proponents have filed a nearly identical follow-up, Initiative 21-0019, that is awaiting a title and summary from the attorney general.
  • Legalizing Psilocybin Mushrooms. Initiative 21-0005 recently received its official title and summary and has been cleared for circulation. The measure would authorize and regulate the cultivation, processing, and distribution of psilocybin mushrooms and the chemical compounds contained therein for personal, medical, therapeutic, spiritual, religious, and dietary use. The products labeled and sold as dietary supplements would be taxable at the local sales tax rate at the point of sale. Other uses would not be subject to any sales, use, or excise tax. Proponents have until March 15 to collect enough signatures to qualify for the November 2022 ballot.