What Is California’s Trump Tax Loophole? (And: How It’s Lining the President’s Pockets)

Unlike my opponents, I’m free to say the truth: these backroom corporate giveaways are hurting California, and I’ll end them.

As governor, I’m going to close what I call California’s Trump Tax Loophole.

It’s an issue none of my fellow candidates are talking about—let alone promising to take action on—and another example of my ability to say and do what others won’t. With no big donors or special interests to appease, the only people I answer to are working Californians.

Here’s a closer look at what the Trump tax loophole is and why it needs to be closed.

Simply put, it’s a billionaire-friendly tax break that lets the wealthiest commercial property owners avoid paying taxes based on what their properties are actually worth. Instead, they can gerrymander ownership so their tax bill doesn’t materially go up, with increases generally capped at about 2 percent per year, regardless of market reality. It lets corporate landlords reap the benefits of rising property values—including by raising rents—while their own tax obligation remains frozen in time.

Homeowners, on the other hand, aren’t so lucky. When a family buys a home, they have to pay taxes on the reassessed—usually much higher—market value. Their tax bill goes up.

It’s a double standard that traces back to Proposition 13, which was promoted as a way to protect aging homeowners from being taxed out of their homes when values rise. But the inclusion of commercial and industrial property created a system that billionaire and corporate landowners can exploit.

Here’s how they do it.

Under the law, buildings get reassessed every time someone buys more than 50 percent. To get around that, corporations use shell companies to slice and dice ownership so that this 50 percent threshold never gets crossed. As long as no single new entity acquires more than 50 percent, billion-dollar buildings can be traded through partnerships, securities on the stock exchange, subsidiaries, and shell structures while keeping the old, discounted tax assessment in place.

That sophisticated corporate maneuvering has cost California an estimated $243 billion since 2012. This is money that should have gone to schools, healthcare, and infrastructure.

Instead, it’s lining the pockets of wealthy corporate landlords—like Donald Trump. The sitting president has an ownership stake in 555 California Street in San Francisco, which market insiders estimate is worth roughly $2 billion. While taxes on the property have risen only modestly over time, the building’s value and income have surged. Because of the loophole, Trump and his partners have gotten an estimated $200 million tax windfall since 2005. They’re paying about $12 million less per year in local taxes than they would if the property were assessed at current market value. You can read all the sordid details in our report “The Trump Tax Loophole: How Billionaires Make You Pay Their Taxes.”

And here’s the thing: this kind of backroom dealing is completely legal. It’s part of a pattern in which regular Californians are asked to play by one set of rules while the corporate elite, aided by their teams of lawyers, are allowed to play by another. Politicians who benefit from moneyed donors don’t want to rock the boat, and powerful corporate interests spare no resources to make sure they toe the line.

My tech-bro funded opponent Matt Mahan, who opposes closing the Trump tax loophole, is a case in point. He says it would harm small businesses. But a report by the University of Southern California found that 78 percent of the billions in revenue that closing the loophole would deliver to California would be derived from just 6 percent of the largest landowners, particularly owners of properties worth more than $5 million. In other words, the people taking the greatest advantage are not small businesses. They’re the largest corporate landlords and billionaires with the resources to engineer permanent tax shields.

The impact is visible across California. Education systems lose stable local revenue. Counties and cities face ongoing pressure in healthcare and public safety budgets. Development is distorted because long-time corporate owners enjoy artificially low carrying costs, which can reward stagnation, discourage redevelopment, and disadvantage new businesses. Meanwhile, first-time buyers pay dramatically higher taxes for comparable property. In Matt Mahan’s own Santa Clara County, homeowners now carry the bulk of the property burden while commercial and industrial owners, including the campuses of trillion-dollar tech companies, pay a much smaller share. All of it points to a system that increasingly makes residents pay what the wealthiest corporations avoid.

Unlike my opponents, I’m free to say the truth: these backroom corporate giveaways are hurting California, and I’m going to end them.

I left billions of dollars on the table by walking away from my business nearly 15 years ago. I wanted to give back to the state that gave me so much, and I’ve spent the better part of two decades doing just that. I’ve powered some of our state’s biggest wins—against Big Oil, against Big Tobacco and, most recently, against Trump’s redistricting power grab.

If I’m elected governor, I’ll add corporate landlords stiffing Californians to that list.