The most contentious issue California voters face on Nov. 3 is not the Presidential election—polls show voters are firmly decided. Rather, it is a tax measure, Proposition 15, which has heavy hitters for it and against it.

Proposition 15 would amend the California constitution to change the way commercial and industrial real estate is taxed, basing it on current market value. Presently, all property, residential and commercial, is taxed based on its last purchase price.

The measure, sometimes called the “split-roll initiative,” excludes commercial agricultural land and commercial properties worth less than $3 million from being reassessed at current market value. The non-partisan Legislative Analyst’s office estimates that Proposition 15 could bring between $6.5 billion to $11.5 billion per year when it is fully implemented in 2025.

Sixty percent of the revenues from Proposition 15 (after it pays the state and local tax assessors for the costs of implementing the measure) would go to cities, counties and special districts, 40 percent to schools and community colleges. The total for each would depend on the amount of new taxes paid by commercial properties in each community.

Supporters include the Democratic Party; Green Party; Democratic Presidential candidate Joe Biden and his running mate Sen. Kamala Harris, (who are ahead of President Trump by about 30 points in the California polls); Gov. Gavin Newsom; the California Teachers Association (a major donor) and most labor unions. 

Opponents include the California Farm Bureau Federation; the California Republican Party; the California Chamber of Commerce (also the Hispanic Chamber of Commerce, Black Chamber of Commerce, American Indian Chamber of Commerce and Asian-Pacific Chamber of Commerce); the California Small Business Association; the California State Conference of the NAACP and several veterans’ organizations.

Lenny Goldberg, long-time executive director of the California Tax Reform Association and Proposition 15’s main architect, said it is a climate-friendly law, because it would also help halt suburban sprawl, which is carbon-intensive.

“A key component of lowering carbon emissions critically depends on intensifying land use, controlling sprawl and strengthening public transportation,” he said. Current tax laws do just the opposite, he added, by encouraging development where land costs less, outside of cities.”

The California Farm Bureau Federation is a vocal opponent. It argues that the way Proposition 15 is written, it exempts agricultural land from the new tax system but not fixtures and improvements, which might include olive trees or barns. The measure, it argues, could be confusing for tax assessors and perhaps a deal-breaker for family farmers. 

Robert Spiegel, governmental affairs advocate for the California Farm Bureau Federation, said that an early one page fact sheet from the Yes on Proposition 15 campaign explicitly spells out that only agricultural land is exempt from the new tax increases.

The flyer reads: “Commercial or industrial structures on agricultural land would be taxed at fair market value, unless the property is owned by a small, independent owner. For example, a dairy barn, food processing facilities and wineries would be reassessed as they are commercial and industrial.”

“The Yes campaign is going up and down the state and they’re starting to deny that it affects agriculture at all,” Spiegel said. “And the reason for that is that it is a devastating vulnerability for them to find that it affects farmers.”

He said that while Proposition 15 exempts agricultural land from the tax increases, it leaves out “fixtures” and “improvements”—which could include silos or tanks or even mature fruit and nut trees, as defined by state property tax rules.

Spiegel said the No campaign is ramping up the process of educating farmers. “As a critical industry,” he said, “this has not been on the radar because we’re still trying to have the ability to eat.”

Goldberg, of the California Tax Reform Association, said the flyer Spiegel referred to was written in error and is inaccurate. Only wineries with tasting rooms may have to be reassessed, he said. 

“There may be some borderline cases, such as wineries with commercial components, which will have to be addressed by the legislature and/or Board of Equalization,” Goldberg said. “There will be implementing legislation and it is clear that these agricultural components will never be called ‘commercial industrial.’ They never have been (called commercial) in the use codes of assessors and will not be under the terms of Prop 15.”

The Legislative Analyst’s office has said that agricultural property used for commercial purposes may be subject to Proposition 15, but to date has not specified or defined what that means. Goldberg says it means overt commercial purposes, like tasting rooms. The Farm Bureau Federation says the measure leaves the question open.

Both sides use the state’s current crises—the pandemic losses that have created an up to $54 million deficit and the largest wildfires in state history—as reasons why Proposition 15 should or should not be implemented. 

A poll released Sept. 23 by UC Berkeley’s Institute of Governmental Studies found a plurality of likely voters, 49 percent, said they would vote yes, while 34 percent said they oppose Proposition 15 and 17 percent remained undecided. When support for ballot measures straddles the 50 percent margin, conventional political wisdom says they usually fail, so the race is tighter than the poll suggests.

As of mid-September, the Yes on Proposition 15 campaign has spent $18 million promoting the measure, compared to $4 million spent by the No campaign. 

Proposition 15’s proponents say it reforms a major flaw in California’s 1978 landmark tax law (Proposition 13), which rolled back taxes to 1 percent of a property’s 1976 market value, subject to no more than 2 percent annual increases, and reassessment at its current market value when it is sold and changes hands. 

After Proposition 13 passed, property taxes, which local governments rely on for schools, law enforcement and local services, dropped by about 60 percent. Large, wealthy corporations with property purchased in the 1970s are still paying taxes based on 1970s real estate prices, far less than owners of similar properties pay if they buy now in California’s overheated real estate market.

Goldberg said that over 90 percent of the revenues generated by the new law would come from about 10 percent of the largest corporations in the state.

The law would not only improve California’s per-pupil spending, which ranks 41st in the nation, he said, but also lower taxes for many small businesses. The measure reduces the taxable value of each business’s equipment by $500,000 starting in 2024 and businesses with less than $500,000 of equipment pay no taxes on those items. Property taxes on business equipment are eliminated for California businesses that meet certain rules and have fewer than 50 employees.

Opponents argue that some small businesses will be hurt more than the big ones because landlords will pass along their tax increases in the form of higher rents, despite losses small businesses have suffered due to the pandemic and California’s wildfires.