By Jon Coupal
To a hammer, every problem looks like a nail. To billionaire and gubernatorial candidate Tom Steyer, every problem can be solved by a tax increase.
In a recent op-ed for the Orange County Register, Steyer said that he’ll create a single-payer health care system, lower energy costs, and build one million homes. How does he do that? And, more importantly, how does he pay for it? Well, to find out more, we went to his website.
Let’s start with his promise of single-payer healthcare. Steyer touts the endorsements of “progressive single payer health care champions like Congressman Ro Khanna and [Assemblyman] Ash Kalra.” That’s important because Kalra has introduced a “Guaranteed Health Care for All” proposal several times in the state Assembly.
The bill has failed to advance in most iterations but in 2021, Assembly Bill 1400 made it to the Assembly floor. The Assembly’s Committee on Appropriations pegged the cost at “$356.5 billion in 2021 dollars.” That’s bigger than Gov. Gavin Newsom’s $349.4 billion proposed budget – the largest state spending plan in California’s history.
How is he going to pay for it? By taxing “corporations and billionaires.” Specifically, he wants to remove what is called the “Water’s Edge Election” for corporations. Under current law, California can only tax corporate profits within its jurisdiction, or, up to the “water’s edge.” That makes sense to normal people. You pay the tax where you make the money. But Steyer, and some legislative Democrats, want to remove that sensible rule and go after a corporation’s worldwide profits, not just what they earn here.
Next is his promise to lower energy costs. To do that, he’s going to tax the oil companies’ “windfall profits,” tax private jet fuel and “break up” the utilities. A windfall profits tax is a tax on “sudden and unexpected profits.” The problem is, at Gov. Gavin Newsom’s urging, the Legislature already passed an “excessive profits penalty” on the oil companies. Implementation was postponed until 2030, but data collected by the legislation shows California refiners operate on razor-thin margins and, at times, even operate at a loss.
Finally, Steyer claims he is going to build one million homes. He plans to pay for it by raising taxes on commercial properties by splitting them off from Proposition 13. Steyer has been calling it the “Trump tax loophole.”
This is how Steyer explains it: “Proposition 13 was passed to protect California homeowners but they snuck in office buildings and strip malls. Here’s how this scam works. The building would be reassessed and revalued every time someone bought more than 50 percent. So they make sure that no one ever owns more than 50 percent.”
But none of that is true. Prop. 13 sets your property taxes at 1 percent of market value (usually presumed to be the purchase price) when you bought and caps increases in the taxable value of property at 2 percent per year until there is a change of ownership. Prop. 13 has no definition of “change of ownership” in its text. The Legislature created those definitions shortly after Prop. 13’s passage.
They decided that for property owned by legal entities such as corporations, LLCs or partnerships, that so long as no more than 50 percent ownership changed hands at any given time, it wouldn’t trigger reassessment. If that’s a problem, it could be changed by the Legislature today. No change to Prop. 13 is necessary.
Steyer knows this but would rather use it to attack Prop. 13. If elected governor, he’s promised on day one to call a special election to split commercial property from Prop. 13 entirely.
Commercial property also wasn’t “snuck” into Prop. 13. In fact, it was a central part of the campaign. There was a competing measure on the ballot, Proposition 8, with the key difference being that it would have allowed a split roll. Voters rejected Prop. 8 by 53 percent to 47 percent. In the ballot argument against Prop. 13, the opponents highlighted that commercial property owners would benefit too. Prop. 13 passed with 65 percent of the vote.
And the voters again said no to split roll in 2020 when they defeated Proposition 15.
But for Tom Steyer, there is no problem that can’t be solved by hammering you for more money.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
