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Tuesday, March 30, 2010

The truth about Prop.13

Listen and Learn

Ask any first year economists and you will learn that the current price for rents and leases are set by the supply and demand curve. If you increase property tax revenue by closing the Prop.13 loophole for commercial property, the merchants will not pass on that cost to their tenants, they can't, because the demand for their "product" doesn't change. Which means the wealthy holding corporation that owns the property, and produces no value, will have to eat the tax cost that they have been avoiding via this loophole.

According to KPBS more than 8% of commercial property in the state of CA, has not "changed hands" since Prop.13 in 1978. That means the property owners, holding corporations, are paying property tax based upon the 1976 property values. Ending this deceitful practice will force corporations to pay their fair share of the 1% property tax. That modest fee will have to come out of their profits.

Now this is tricky because the business community set up the system this way to confuse and deceive and manipulate the common voter. You see, when an investment property owned by a holding company makes money from rent, the owner disguises any profits by paying for "business expenses" like his own salary, bonuses, benefits, or other personal expenses, like the company car, travel, etc.

Thus, the owner of the corporation avoids the appearance of profit, and the subsequent tax burden. When the owners salaries get too high, and their personal income tax burden begins to be cumbersome, they hire family and friends, and write off their salary and benefits as "business expenses", too. When all else fails, they "invest" company profits in new properties, via subsidiary holding corporations, and the process repeats itself.

This is the pattern of wealth in California, a series of slum-lords become "Developers" and use their wealth to corrupt our government. Wake up California!

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