Tom Steyer assails ‘Trump’s tax loophole’ — but it’s just Prop. 13

“California’s ‘Trump Tax Loophole’ is a billionaire-friendly tax break that lets the wealthiest commercial property owners avoid paying taxes based on what their properties are actually worth,” proclaims Tom Steyer, candidate for governor of California, on his website.

Steyer has described this “loophole” in debates as if it is a special benefit for corporations, a “corporate real estate tax loophole.”

In the gubernatorial debate on CNN, for example, he declared: “I will on the first day [in office] call a special election to close a corporate real estate tax loophole that’s worth over $20 billion. … California government needs more money.”

But Steyer’s website admits: The “loophole” is actually Proposition 13, the popular constitutional amendment that protects ordinary homeowners across the Golden State.

Steyer has described this “loophole” in debates as if it is a special benefit for corporations, a “corporate real estate tax loophole.” Godofredo A. Vásquez/Pool AP via AP

“It traces back to Proposition 13,” Steyer’s site admits, “which was promoted as a way to protect homeowners from being taxed out of their homes when values rise.”

That description leaves out a lot of information.

Prop. 13 is the “People’s Initiative to Limit Property Taxation,” from 1978, a time of high inflation under the Carter administration, and people were indeed being taxed out of their homes. The measure froze property taxes at 1% of assessed value at the time, and limited increases from that base to 2% per year. 

Gov. Jerry Brown called Proposition 13 a “fraud” and a “rip-off,” but after it passed 65% to 35%, Brown acted as though he had authored the proposition, and proclaimed himself a “born-again tax-cutter.”

Since then, politicians and bureaucrats have blamed Prop. 13 it for revenue shortfalls.

But if not for Prop. 13, more California workers and families would doubtless have joined the current exodus to lower-tax states.

“It traces back to Proposition 13,” Steyer’s site admits, “which was promoted as a way to protect homeowners from being taxed out of their homes when values rise.” Chris Allan/Shutterstock

Prop. 13 does include commercial property, and that’s what bothers Steyer. 

He claims that Trump’s building on California Street in San Francisco is some kind of “massive corporate tax giveaway.” As Steyer should know, a limitation on tax hikes is not any kind of a “giveaway,” and neither is a tax cut.

Moreover, as Edward Ring of the California Policy Center notes, small businesses such as restaurants, construction companies, truckers, repairmen and so forth also own commercial property. The check on tax hikes is what enables California’s small business to compete with major corporate chains. If not for Prop. 13, they, too, would likely close down or leave. 

Download The California Post App, follow us on social, and subscribe to our newsletters

Prop. 13 required a two-thirds supermajority for state and local tax increases. Proposition 5 of 2024 would have lowered the supermajority to 55% for local bond measures. Voters turned it down by about 55% to 45%.

But on another measure, the people didn’t get to make the call.

California’s Taxpayer Protection and Government Accountability Act, which would have appeared on the 2024 ballot, required voter approval for all new taxes passed by the Legislature and two-thirds voter approval for all new special tax increases. The act required that before any tax or fee could be enacted, politicians would have to outline clearly how revenues would be spent. 

The measure gathered nearly 1 million signatures, and qualified for the ballot. Gov. Gavin Newsom and former Gov. Jerry Brown, forgetting his “born-again tax cutter” identity, leaned on a compliant state Supreme Court to have it taken off the ballot. For all but the willfully blind, that effectively disenfranchised the voters.

Prop. 13 is not a “tax loophole,” and Donald Trump had nothing to do with it. California’s financial woes proceed from a ruling class dedicated to high taxes, stifling regulation and contempt for the people.

Steyer is targeting Trump, corporations, and his fellow billionaires. But if Prop. 13 is weakened, it will eventually disappear. And if that happens, middle-class homeowners will be hardest hit.

Lloyd Billingsley is a policy fellow at the Independent Institute in Oakland, Calif.