Schrag: Prop 13 Breaks for Corporations Have Cost Counties, Cities, and Local Schools Billions

The solution, long discussed by Goldberg and other tax reformers, but never given a fair shot, is the split roll. It would leave owner-occupied residential property untouched but put the taxation of business property on a more realistic basis. It would require periodic reassessment corresponding to turnover in partners or stock ownership of business property, title to which rarely turns over.

The defenders of the current system, whose predecessors never mentioned breaks for banks, oil refineries, railroads, utilities, office towers and hotels when they promoted Proposition 13, now say it would force up rents on small enterprises and drive out or discourage business.

But the owners of rental property never lowered rents when they got their big break 30 years ago. The response after 1978 was a wavelet of local rent control ordinances that the Jarvis Taxpayers Association, always the faithful friend of renters, tried vainly to get rid of with Proposition 98 earlier this month. Rents are market driven; if they didn't go down in 1978, why would they necessarily go up now?

Equally important, according to the Council on State Taxation in California, both the business share of the overall state and local tax burden and the overall tax on business as a percentage of gross state product are below the national average. The share of the burden here is lower than in Texas, Arizona or Nevada, the places that the chicken-littles of California business always say our jobs are fleeing to. Any reasonable reassessment would still not bring California's business tax burden up to the national average.

Aware that their chances with the Legislature are nil, Goldberg and a few collaborators are now trying to lay the groundwork for a ballot measure either in 2010 or in 2012.

They know they don't have a prayer unless they lay a lot of groundwork, particularly in informing Californians how much better their local services might be if they could get their local behemoths – many already benefiting from fat loopholes – to pony up their fair share of property taxes. It might also put both private and government land use decisions on an economically and socially more reasonable basis.

It would end the frantic pursuit by local entities of shopping malls and auto malls whose sales taxes now represent the only net gain from new development. That might in turn open the door slightly to balanced planning of housing, job-creating industry, transportation and retail.

The split roll doesn't come close to addressing all of California's revenue problems: a service sector, now dominating the economy, that's exempt from sales taxes; gas taxes that don't come close to paying for transportation infrastructure or maintenance; a gridlock-inducing supermajority requirement for enacting budgets and raising (but not lowering) taxes; and more.

Still, even if the split-roll idea fails, it might start a conversation about taxes and services in California that's 30 years overdue.

Peter Schrag is the former editorial page editor of the Sacramento Bee. This article is published with his permission.