HFA alerts California members to tax threat

For California members of the Home Furnishings Association, this has been a very difficult year. And it can get worse if voters approve Proposition 15 on the Nov. 3 ballot.

Business shutdowns in response to the coronavirus crisis and widespread wildfires delivered a devastating economic impact to the state. While demand for home furnishing products picked up, supply chain disruptions hindered a rapid recovery. Now, a proposed multibillion-dollar tax increase poses a long-term threat to industrial and commercial property owners and businesses that rent or lease space from them. Furniture stores and warehouses could be hit very hard.

The HFA has sent two email alerts to California members to draw attention to Prop 15. It has pointed members to resources they can use to gain more information about the potential fallout and add their voices to the debate about this consequential initiative.

If approved as a constitutional amendment, Prop 15 will make profound changes to the taxpayer protections afforded by Prop 13 since 1978. It will particularly impact how commercial and industrial property taxes are calculated. Rather than basing property taxes on the original value of property, plus 2 percent annual growth or the rate of inflation, whichever is lower, Prop 15 would let government tax commercial and industrial property on its current market value. That value would be updated every two years. This would cause a major ballooning of business property values.

Prop 15 could raise taxes by $11.5 billion

Properties valued at less than $3 million would be exempted, but that is a cumulative amount. A business that owns several properties with total value exceeding $3 million would face the new calculation for each property. Furthermore, small businesses would pay the cost if they rented or leased their property from larger landlords. Many tenants have leases that require them to pay the property tax.

Chris Arnold, vice president of finance for Home Furnishings Association member Mor Furniture for Less, based in San Diego, attempted to calculate the impact on his company.

“Because statewide revenue projections are as wide-ranging as $6.5 billion to $11.5 billion, and the Proposition 15 implementation policies have not been defined, it is impossible to estimate the ultimate impact,” he said in a statement to HFA. “The only thing known is that costs will increase in ways that may not be related to business results. It feels like we might as well be rolling dice for taxes. Given that, in some facilities, mitigating price increases to customers would be significant.”

HFA watches state actions that impact you

When supply chain problems and product scarcity already are forcing prices higher, significant tax increases will only add to the dilemma for retailers. How much of those higher costs could they absorb and how much would they have to pass to customers? Neither option is good.

That’s why a vast coalition has formed to oppose the measure. With a global pandemic devastating California’s economy, there could not be a worse time to impose business-breaking higher taxes.

The HFA’s Government Relations Action Team has focused on COVID-19 relief efforts in Washington, but actions taken at the state level matter, too. So, it tries to alert members in states to issues that affect their businesses and urges them to engage with policymakers and the public. In the case of Prop 15 in California, members can start by telling their customers that business taxes often are  shared through higher prices.

[HFA pushes harder for PPP loan forgiveness]

Not a member of the HFA? Let us know you’re interested and we’ll show you how you can add your voice to ours.


Share this post |

Share on facebook
Share on linkedin
Share on twitter
Share on pinterest
Share on print
Share on email
HFA Members

Not an HFA member?

Don't miss out on all of our association benefits!