Categories
Updates

We Pay More When Corporations Don’t Pay their Fair Share of Taxes

The biggest beneficiaries of Proposition 13 at the expense of communities of color have undoubtedly been corporations and wealthy investors. – AAPIFORCE EF

Proposition 13, a ballot initiative passed in 1978, has had an adverse impact on AAPIs and other disadvantaged communities in California ever since its passage. When Proposition 13 was passed in 1978, it essentially did three things: it limited the property tax of all properties to 1% of its value at the time of purchase, made it so that property could be reassessed only when it changed hands, and mandated that property taxes couldn’t increase more than 2% a year. Although Proposition 13 has long been framed as an initiative driven by homeowners responding to the rise in property values and taxes in the 70s, this narrative ignores the fact that the proposition was also motivated by racist and classist intentions.

Included on the same ballot in 1978 with Proposition 13 was Proposition 8, which would have limited residential property taxes in much the same way Proposition 13 did. The main difference between the two measures was that Proposition 8 would have reduced property taxes except for the portion levied by school districts, which would have been reallocated to equalize school funding for Black and LatinX communities in California. Proposition 13, on the other hand, did nothing to protect school funding for underserved communities of color. This difference between the two initiatives was crucial — the predominantly white and wealthy districts which were heavily in favor of Proposition 13 were also strongly opposed to Proposition 8. Therefore, the narrative that Proposition 13 was an initiative driven mostly by homeowners revolting against high property taxes is not accurate; the fact that Proposition 8, an initiative which would have also limited residential property taxes, was defeated on the same ballot reveals Proposition 13’s racist and classist undertones as white communities voted against equalizing education funding with Black and LatinX communities.

The biggest beneficiaries of Proposition 13 at the expense of communities of color have undoubtedly been corporations and wealthy investors.

Corporations especially have benefited greatly by avoiding paying more than 1% of the original purchase value in property taxes. Universal Studios, for instance, has avoided paying $36 million a year in property taxes, while Chevron used Prop 13’s loophole to evade $100 million a year. Due to Proposition 13, corporations across California have gotten away with not paying their fair share of property taxes while raking in huge profits.

Their success is at the expense of everyone else in California. Not only do working-class communities of color suffer the most from budget cuts, but the people of California have had to make up the loss in tax revenue in a variety of ways due to corporations taking advantage of Proposition 13.

Although Prop 13 was packaged as protection for homeowners, it actually shifted the property tax burden from corporations to homeowners.

Image for post

Former U.S. Secretary of Labor Robert Reich points out that in 1978, corporations paid 44 percent of property taxes while homeowners paid 56 percent, but due to Prop 13’s corporate tax loophole, corporations only pay 28 percent of property taxes while homeowners pay the remaining 72 percent.

Additionally, with less revenue coming from property taxes, lawmakers have needed to increase sales tax to make up for the loss in funds. There has been such a rush for sales tax revenue, in fact, that many communities have been transformed by gentrification. In Pasadena, the lack of property tax revenue had pressured the city government to approve the development of more malls in order to generate sales tax revenue. This has decimated mom-and-pop shops in the downtown area, however, as they have struggled to compete with the malls. The former mayor of Pasadena even admonishes the decision to develop more malls in the city, blaming cities for becoming “addicted” to sales tax revenue.

The rise in sales tax also disproportionately impacts lower-income Californians: research shows the poorest Americans pay 11% of their income in state and local taxes, while the wealthiest only pay 5.4% of their income. The increase in sales taxes, therefore, harms predominantly working-class communities of color the most, whose incomes are more affected by sales tax compared to white Americans.

The data clearly shows a sobering reality: when corporations pay less, marginalized, working-class people end up paying more.

But we can transform California’s tax system into one that works for all of us: Asian, Pacific Islander, Black, White, LatinX, and Indigenous communities. This November, we can vote to reinvest money back into our communities by holding corporations accountable to pay their fair share of property taxes.

Image for post

The Schools and Communities First Act, or Proposition 15, will be on the ballot to undo the damage Proposition 13 has caused for our communities. Schools and Communities First will close the tax loophole for corporations by requiring land with property values of $3 million dollars or more to undergo regular and ongoing reassessments to bring those properties to their current market value, while protecting homeowners and renters by excluding all residential properties from reassessment.

By ensuring that corporations are taxed fairly, Schools and Communities First is estimated to generate over $12 billion dollars in revenue, which will go directly into local communities and public schools to make up for decades of disinvestment. It’ll also alleviate the tax burden for working people, as corporations paying their fair share of property taxes will generate much needed revenue for California, which will be key for the rebuilding of our communities after COVID-19. I believe that by passing Schools and Communities First in November, we WILL be able to reverse the harmful effects of Proposition 13 and ensure that the working class and people of color are adequately funded and supported.

To support Schools and Communities First (Proposition 15 on the ballot), there are a couple of things you can do to ensure it passes this fall!

  • Vote! In California, all registered voters will receive a mail-in ballot in October. Register to vote here! If you need to, you can check your voter registration status online here.
  • Spread the word! Share this blog post with your friends and families to inform them about the campaign.
  • Volunteer! Join AAPI FORCE’s 100 Champions for Our Schools & Communities program and learn more about our volunteer opportunities here.
  • Donate! Support AAPI FORCE’s work supporting Schools and Communities First here.

About the Author:

My name is Andrew, and I am an intern for AAPIs for Civic Empowerment Education Fund. I’m currently a rising sophomore at Pomona College, where I intend to major in History and Asian American Studies. I joined AAPI FORCE-EF because I believe it’s important to amplify the voices of marginalized Asian American and Pacific Islander communities in California in order to build our political power and fight for lasting social and economic change. So far, the highlights of my quarantine have included taking long, contemplative walks through my neighborhood, making my own banana oat smoothies, and watching Avatar: The Last Airbender for the first time on Netflix.

Leave a Reply

Your email address will not be published. Required fields are marked *