The California Tax Reform Ballot
GroundSwell, July-August 2009]
Frank Walker, a California attorney, is currently drafting a
ballot initiative intended to reinvigorate California's sagging
economy and put unemployed Californians back to work. These goals
will be accomplished by eliminating state taxes which discourage
productive activity and new capital investment. A tax on the rental
value of land will be the new source of state and local government
The proposed ballot measure is expected to be sponsored by a group
now forming under the tentative name of Californians for Prosperity
Through Tax Reform.
The target date to submit the proposed ballot measure to the State
Attorney General's Office is September 25, 2009. This is a required
step under California law governing ballot initiatives. The AG's
Office will review the initiative for proper legal form, prepare a
summary of the initiative and will give it an official name.
During the eight weeks that the measure is expected to be under
review by the AG's office, supporters intend to mount an online ad
campaign to draw viewers to a website which will make the case for
Once the official summary has been released, supporters will have
approximately five months to gather the nearly 700,000 signatures
needed to qualify the initiative for the state-wide ballot in Nov,
If the necessary signatures are obtained and the measure appears
on the ballot, the initiative will become law if 50% + 1 of the
votes cast on this particular proposition are "yes" votes.
The California Tax Reform: "Let California Prosper"
This ballot measure, when approved by voters, will largely
eliminate taxes which discourage productive enterprise and commerce
in California. Public revenue will instead be provided by a tax
calculated to collect 75% of the annual rental value of California's
- In a single stroke, California will become the most attractive
place in the US for labor and capital to engage in production. New
investment will flow in and jobs will multiply as California's
economy begins to rapidly grow. This is the economic stimulus that
California really needs - without a single dollar of federal
- Taxes will be reduced or eliminated for a substantial majority
of California's population. Non-landowners, such as those who rent
their housing, will effectively be freed from taxation. Millions
of working homeowners, especially those households with two
wage-earners, will also benefit significantly as will the vast
majority of businesses and high-income professionals.
- Unlike California's present tax system, the new system based
upon the collection of land rent will provide sufficient revenue
to meet state and local needs. In addition to the present land
value tax base, land rent will increase as existing taxes on labor
& productive investment are eliminated. This reduction in
taxation will enormously increase the demand for land in
California. Since land in Calif. is in fixed supply, an increase
in demand for land in our state will result in a higher price
(rent). State & local public revenues will significantly
increase from present levels.
The initiative is currently being drafted. The target date to
submit the initiative to the California Attorney General's Office is
September 25, 2009. With the required number of signatures by
registered voters, the initiative will appear on the state-wide
ballot in November, 2010.
- Personal income tax: The first $150,000 of each person's income
will be exempt from this tax. The maximum income tax rate will be
reduced from the present level of 10.3% to 7.5%. Allow a
nonrefundable income tax credit for any land value taxes paid by
the taxpayer in California.
Note: The top 1% of taxpayers in income pay 50% of the revenue
collected by California's PIT and the top 5% pay two-thirds of the
total revenue. The reform will effectively abolish PIT liability
for 95% of present taxpayers while reducing the tax rate for those
still subject to PIT. The tax credit for LVT paid will assure that
many wealthy taxpayers will experience no increase in their total
state tax burden even though their LV (property) taxes increase.
- Sales & use tax: Abolished.
- Property tax on improvements: Abolished.
- Corporate income tax: Abolished.
- VAT or business gross receipts tax: Prohibited / Abolished.
- Property tax:
(a) Assessed solely on the value of land.
(b) Land to be assessed at fair market rental value.
(c) Tax rate to be 75% of rental value.
(d) Notices to be sent quarterly reflecting current rental
value of owner's land parcel although taxes due calculated on
that value may be paid in three equal monthly installments.
- Alcohol & Tobacco excise taxes: Not affected.
- Oil severance tax: California is the only major oil-producing
state in the US without such a tax. Although the tax reform
initiative will not establish such a tax, it will specifically
provide that the legislature has the power to levy such a tax so
long as any payment of a severance tax on a natural resource,
including hydrocarbon deposits in any form such as petroleum, is
credited against property tax due on such natural resource
deposits or fields. Thus, levying of property taxes on the value
of an oil field (without regard to improvements) will encourage
production of oil to pay those taxes. However, when oil is
actually severed or pumped from the earth, the severance tax will
then apply to capture the largest part (75% or more) of the
resource rent while offsetting property tax liability on that same
- Allocation of property tax revenues: Property taxes to be
collected by the counties with all revenue received to be
forwarded to the state treasurer. Counties and all municipalities
& districts within counties to be guaranteed the average of
revenues received by such counties / cities / districts during the
three year period from July 1, 2007 through June 30, 2010 from the
property tax and from any tax which is abolished or reduced by the
initiative. This is a minimum level of guaranteed revenue. Due to
the markedly higher and steadily increasing revenues received by
the state from the collection of land rent, the state of
California will have the ability to commensurately increase the
amount of revenue provided to local government at all levels.
- Date of implementation: Since county assessor's offices will
need 4 to 6 months to prepare for the change, and since California
operates on a fiscal year which begins on July 1 of each year, the
initiative will establish July 1, 2011 as the date effective date
for the tax reform to become effective. Notices of property tax
due in the first quarter will be sent on June 1, 2011 with the
first monthly tax payment due on July 10, 2011.