In Sacramento Bee columnist Dan Walters' Dec. 5 article ("Should property taxes be raised?"), he discussed the possibility of revising or repealing Proposition 13. That would be a fantastic idea.
Prop. 13 was poorly conceived, as it eliminated the ability of assessors to reassess the value of houses as their values increased due to market pressures. It had nothing to do with normal inflation. So, while every service the state provides increases in cost, the chief funding agency is unable to increase the amount of money that comes in from property taxes.
There are two things that should have been included in Prop 13. One is it should have allowed the reassessment of houses based on annual inflation rates so the revenue could have kept up with government spending. Secondly, and actually the most important, it should not have exempted commercial property.
There is no provision for commercial property owners not to increase rents to tenants, so as their income goes up due to inflation, their property value stays fixed. That is, you would say, until they sell it, right? Wrong. Commercial buildings are almost always placed into an LLC before being sold. Then, instead of selling the building, the LLC is sold. The result is the building never being reassessed because it has not been sold, even though it has, in reality, changed ownership.
When Elk Hills was sold to Occidental Petroleum, the price per barrel of oil reserves became fixed. Thus no matter how high the price of oil increases, the property tax on the oil stays fixed at its purchase price. So, the next time you complain about the high income tax in the state of California, remember why it is so high: low property taxes.
Kerry S. McGill