Prop 15 hurts small businesses, family farms, ranches

OPINION by BRENT BURCHETT

You guys really seem to hate your farmers and ranchers here.

Coming to California from Kentucky a year and a half ago, the only thing I really knew about California was its world-renown ag industry. Sadly, my time here has taught me that most of our urban neighbors don’t understand what it takes for today’s farm and ranch families to produce food, and if Prop 15 passes, the plight of agriculture will get a lot worse.

What state imposes the highest average property tax burden on farmers and ranchers? Unfortunately, when it comes to taxes and regulations, you will usually be right guessing California every time—and in this election, California voters are being asked to double-down on this state’s high-tax reputation by approving Proposition 15.

The measure on the Nov. 3 ballot would weaken Proposition 13, the 1978 tax-reform measure that limits property tax increases, by establishing a “split-roll” tax that would reassess commercial and industrial property, including agricultural facilities.

Maybe there’s nothing certain but death and taxes, but voters should be aware: Creating a new split-roll tax with Proposition 15 would result in the largest property tax increase in state history—and would likely mean the end for more California farms. This $11.5 billion tax increase on California businesses would come at a time when California farms, ranches and agricultural businesses could lose up to $8.6 billion this year alone due to COVID-19.

Special-interest groups and unions have been strategizing to roll back Proposition 13 property tax protections for 40 years. The last attempt came in 2015, when Gov. Jerry Brown acknowledged a split-roll property tax scheme was overly complex and stated, “I’m not supporting a split roll.”

Backers of Proposition 15 have tried to claim it exempts agriculture and may even have a few of our fellow farmers believing that. But make no mistake: Agriculture is not exempt.

Granted, the initiative says it exempts agricultural land—but it would raise taxes on what is considered “real property,” such as improvements or fixtures. Even state Attorney General Xavier Becerra, in the initiative’s ballot summary, acknowledges that only agricultural lands would be protected from tax increases.

So, what property would be reassessed? Improvements and fixtures liable for tax increases would include barns; mature fruit and nut trees; producing vineyards; wineries; irrigation systems; even solar panels. You could also add dairy barns, processing facilities, machinery garages, crush facilities and hen houses—all considered commercial and industrial property under the measure—to the list of property that would be reassessed.

By the way, this isn’t just the opinion of Farm Bureau and other opponents. Backers of Proposition 15 acknowledged as much in an “Agricultural Land Fact Sheet” they distributed last February.

Proposition 15 would severely undermine the enormous investments farms and ranches have made to add value to our commodities. In other words, the improvements farmers and ranchers have made in the last 40 years, whether for product marketability or environmental stewardship, would be exposed to a property tax hike under Proposition 15.

SLO County Assessor Tom Bordonaro has published a Prop 15 Impact Report on the County Assessor’s website that confirms how our local farm and ranch families will be harmed if Prop 15 passes.

Last week, Assessor Bordonaro was part of a coalition brought together by our SLO County Farm Bureau at Tom Ikeda’s avocado grove in Arroyo Grande to inform local media outlets about Prop 15.  Our team included SLO County Cattlemen’s Association President Anthony Stornetta, South County Chambers of Commerce President/CEO Jocelyn Brennan and SLO Chamber President/CEO Jim Dantona.  You can watch a video from the event on our Facebook page here.  Please share this video and help educate our neighbors about the dangers of Prop 15.

The worst part of any tax is the core intention to manipulate and/or control human behavior; it is this indirect cost of a tax that can ultimately be the most damaging. Proposition 15 would create a powerful incentive for local governments striving to maximize property tax revenues to rezone agricultural land to commercial and industrial property and deny variances for agricultural use of the land in that rezoned area.

The proponents concede, “If vacant land is zoned commercial and industrial, it could be reassessed.” This would increase the already powerful incentives to remove land from agricultural use and intensify land use decisions made solely on tax revenue potential.

According to the U.S. Census of Agriculture, an average California farmer’s or rancher’s annual property tax bill totals $17,299—the most of any state. Proposition 15 and its proposed property tax increases would not only make California agriculture less competitive—it would make our farms and ranches less viable.

Confusion over Prop 15’s implications for small businesses and the agriculture industry continues, as proponents falsely claim that the new law will only affect “large corporations.” If you have friends who are still believing the hype on Prop 15’s “exemptions for agriculture and small businesses” here’s the truth:

Prop 15 has contains two separate taxation components:

What is referred to as “real property” – this is the land, improvements (barns) and fixtures (irrigation equipment). The test provided by Proposition 15 is that fair-market value reassessment will be triggered if a property owner has a valuation of more than $3 million. The number of employees is irrelevant when it comes to the reassessment provisions of the initiative.

The second is “tangible business property”, or business personal property (terms are used interchangeably). Tangible business property is office equipment – desks, chairs, fax machines, computers, phones, etc.

The “small business exemption” only applies to tangible business property, not real-property. In other words, an exemption is created only for my office equipment but not the soil of my farm, or my barn, or my grapes. If a business qualifies as a “small business” as defined by the initiative, the small business is exempt from paying any personal property taxes.

The problem is a small business must meet all the components of a three-pronged test, being:

  1. Fewer than 50 annual full time equivalent employees;
  2. Business must be independently owned and operated such that the business is not subject to control by an outside sources or individual;
  3. Business owns real property located in California.

The truth is that very few businesses would qualify for the exemption because more than 75% of businesses rent the property – they don’t own the building and therefore do not qualify for the exemption. The number of the employees only matters for office equipment and does not prevent any business, farm or industrial property from triggering the fair-market value reassessment by Prop 15.

The claim that business with fewer than 50 employees won’t be impacted by Prop 15 is a complete fabrication meant to further deceive the voters of San Luis Obispo County as to the true impacts of this initiative. The special interests behind Prop 15 have lied about the impacts on our farmers and ranchers, lie about the impacts this will have on our businesses, and are lying to all Californians. Read the full text of the proposed law from the California Secretary of State here.

Ensure a brighter future for California agriculture, join the San Luis Obispo County Farm Bureau, SLO County Cattlemen’s Association, County Assessor Tom Bordonaro, and our local business leaders in voting no on Proposition 15!

Brent Burchett is the executive director of the San Luis Obispo County Farm Bureau and can be reached at bburchett@slofarmbureau.org. Click here for more information on Farm Bureau’s opposition to Prop 15.

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