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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%.