UCSD research examines how Proposition 15 may affect racial income gaps

Racial Income Gaps

In recent months, as communities around the country responded to the murder of George Floyd, our national conversation around race focused on criminal justice, but also on how race impacts economic opportunity. Major indicators point to a staggering income and wealth gap between whites and people of color. In 2016, a study from The Brookings Institution showed that white American households had more than ten times the net worth of Black and Latinx households. This gap is not accidental, but rather the result of centuries of systemic racism. As the COVID-19 pandemic has ravaged the country this year, experts have found that the pandemic is exacerbating existing inequalities.

We know that a wide variety of laws and policies affect the likelihood that communities of color will have equitable access to education, job opportunities, wealth creation, etc. On this November’s ballot, the Schools and Communities First Initiative – also known as Proposition 15 is legislation that may have an impact on many communities. SVCF has commissioned independent, objective research into the impacts of the Schools and Communities First initiative. Two major questions we sought to answer: How might Proposition 15 impact the income gap in California, and could its passage help California invest in a more equitable future for all.

SVCF, in partnership with Stupski Foundation and others, commissioned Dr. Isaac Martin, Professor and Chair of the Department of Urban Studies and Planning at the University of California, San Diego, to examine how Proposition 15 might the income gap between residents of different races. To do so, Dr. Martin referred to 1978, when voters passed Proposition 13, the tax reform law that mandated caps on both residential and commercial property assessments. Assessments form the basis of taxation rates. In his research, Dr. Martin sought to discover the alternative outcomes if Proposition 13 had not included a commercial property assessment cap. (Proposition 15 proposes to remove this cap for properties valued at more than $3 million.) These are some of the conclusions of his research:

  • Public expenditure cuts that result from the commercial property assessment cap have most likely disproportionately reduced the incomes of Black people.
  • California’s commercial property assessment cap likely widens income disparities among racial groups.
    • According to the best available estimate, the income gap between otherwise typical households headed by white and Black adults is 12% wider than it would be if Proposition 13 had only applied to residential property, rather than to both commercial and residential property.
    • The income gap between white and Latinx adults is 23% wider than it would be if Proposition 13 had only applied to residential property.
  • A reform that replaces a commercial property assessment cap with fair market assessment could reduce income disparities among racial groups.

SVCF and partners commissioned the collection of this evidence to provide voters with valuable insights as they consider voting on Proposition 15 this November. Read Dr. Martin’s full paper titled “Commercial assessment limitation and income inequality among racial groups.” This is also available on our Schools and Communities First landing page, along with other third-party, nonpartisan research, including briefs on education, infrastructure and revenue, also commissioned by SVCF and partner. Please continue to reference this page for the most up-to-date research. We look forward to releasing additional briefs in the coming months to provide California voters with objective information about Proposition 15, the Schools and Communities First initiative.