Prop 13: 30 years later, it’s time to stick a fork in this loser
In case you missed it, Sunday marked the 30th anniversary of the passage of Prop 13, the measure that capped California property tax increases and ignited a taxpayer revolt across the country that blah, blah, blah…If you don’t know much about it, the folks at Cal Tax Research will be happy to give you the history here.
The real debate going on today is what we have gained and what have we lost. Two Sac Bee columnists lay out the debate here and here. The Bee’s Dan Walters gets to the heart of it:
“Then-Gov. Jerry Brown, who was running for re-election, had strongly opposed Proposition 13 along with virtually every other political figure, but immediately declared himself a “born-again tax cutter” and later ran for president while chanting that mantra.
Brown is back in state politics as attorney general and a likely candidate for governor again in 2010. If the state’s fiscal crisis continues, as it likely will, he may once again have to confront the never-answered question that Proposition 13 posed: What do Californians want from government, and what are they willing to pay for it?“
My personal take: It’s been a disaster for the state and remains grossly unfair. There’s simply no justifiable reason that I pay 10 times the property tax as my neighbor (which I do). But more on my thoughts later.
The big “news” this morning is that California taxpayers remain delusional and are still in love with their precious Prop 13. According to a Field Poll release on Monday:
“The property tax reduction initiative passed in 1978 with 65 percent of voters in favor and 35 percent opposed. The Field Poll found that if the vote were held again today, 57 percent would still vote “yes.” Another 23 percent would vote “no,” and the rest are undecided.”
A quick scan of the state’s major newspapers editorial pages shows a range of takes on Prop 13’s legacy.
Let’s start with mine. Our editorial board still has a major crush on Prop 13:
Correction: This was a Contra Costa Times editorial, and NOT from the Mercury News:
“Californians today should be wary of any attempts to dilute Proposition 13 because of current state deficits. The huge growth in state spending in recent years under both Govs. Gray Davis and Arnold Schwarzenegger — and the resulting deficits — should be warning enough of what could happen on a local level if Proposition 13 were gutted.
Voters must not allow any further erosion of the single best protection Californians have against runaway taxation.”
Up the road, the San Francisco Chronicle has mixed feelings:
“The measure has meant surety and hard restraint in property taxes. But it hasn’t brought fairness or balance to a growing state. For now, California is living with that trade-off.”
And way down south, the Los Angeles Times meekly calls for a re-examination:
“Defenders of the measure and its offshoots have taken to reflexive denunciations of any attempt to discuss Proposition 13 and whether it should be amended to provide fairer taxation for residents, and more rational levels of revenue to pay for the quality of infrastructure and governance that Californians still expect. But birthdays ought to be a time of self-examination. Proposition 13 provides predictability for homeowners, and it ought to be retained. But it may be time for a haircut.”
Clearly, if you’ve stayed in a house a long time, then Prop 13 has been a godsend. But it also has become a big dis-incentive to moving. Move, and you risk a big jump in property taxes.
Also, while it’s kept bills down for homeowners who stay put, I don’t think it’s helped keep overall housing costs more affordable. Clearly, even in the current downturn, housing is way more expensive in California than in most areas of the country. Brokers and Realtors know how much someone can spend on a house, and still try to get the maximum. So while taxes might be less, the mortgage for a new home buyer is probably the same overall, with the cost simply shifting to a higher mortgage rather than the taxes.
There’s a healthy debate over just how much impact this has had on the overall state budget. But one thing is clear: By relying much more on sales personal income taxes, California’s budget has been vulnerable to big swings in the economy. And legislators, and the governor somehow reamain unprepared for this phenomenon, year after year. Thus, we’re living through yet another budget crisis.
Also, much of the discussion about Prop 13 tends to be about how it has helped home owners. But people often forget that Prop 13 extends to commercial real estate as well. And because commercial property tends to change hands less frequently, businesses have probably been bigger beneficiaries of Prop 13 than the average Joe.
But let’s circle back to Walters’ question: What do Californians want from government, and what are they willing to pay for it?
The central hypocrisy of Prop 13 lies with the people, not just our government. And it’s a symptom of the era we live in. Everyone claims that we want smaller government (well, not everyone. But…) and that we want lower taxes. That’s the dominant theme of our political culture.
But take one step to cut one thing from a state or federal and there will be a howl of protest. And so spending continues to grow, but probably at a pace slower than what is really needed to fix our schools and infrastructure. Yet government can’t raise the appropriate taxes to pay for it.
So, what to do? Answer: The lottery. The lottery is essentially a means by which we trick ourselves into paying taxes. It’s the work around that government has developed to balance out the contrarian impules that flow from the tax cutting culture and the desire for more government spending.
And notice that in this latest budget crisis, our governor is once again turning to the lottery to paper over the budget problems.
It’s time to stop this nonsense. Scrap the lottery. Scrap Prop 13. And just start from scratch. Create an equitable and predictable tax system that funds the programs California needs to get back on track and recover its legacy as a leader in state government and education that it last had back in the 1970s.
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Sorry but you dont seem to understand this issue whatsoever. This legislation was enacted to keep the greedy (one party state) politicians in Sacramento from robbing us blind with property taxes. Look at the grief high property taxes cause around the county. Cities in California are going bankrupt due to poor management and people are leaving due to overtaxation.
Remember, it is not that you are paying 10 times more taxes than your neighbor, it is that your BOTH not paying 10 times more. Don’t be narrow minded.
Prop 13 is NOT the problem. Out of control spending is.
The lack of will of the politicians to control rampant spending is the problem not the limitations Prop 13 imposed on the rate of tax increases.
It would be interesting to see the average of the property tax rate increases for the 5 years prior to Prop 13 compounded for all the years since Prop 13 on an average home tax bill say in Sunnyvale or Santa Clara at the time Prop 13 passed.
Home owners and many others voted for Prop 13 for tax bill were beginning to be more than the mortgage payments on a typical home purchased with 10% down. If the politicians were not restrained by Prop 13, I would have lost my home within a year or two for I had no means to increase my income at the same rate the property taxes were being increased and I was NOT on a fixed income.
The per capita property tax increases between FY1999 and FY2004 in California averaged 22% due to new homes, purchases of existing properties, re-modeling assessment adders, and other allowed increases per Prop 13. This while the average per capita income increase was only 14%.
The question that should be asked is: “Why, after 30 years, have our politicians still not learned the lesson of spending within their income limits?”
What Mr. O’Brien did not mention in his article was that for the 5 year period prior to the 1978 passage of Prop 13 average homeowner property taxes in California grew nearly 20% per year! This was a primary factor in many people voting for Prop 13 - the government could not be trusted to spend within a reasonable range. The government mentality (both local and state) then was to simply increase the assessment pool value and/or increase the tax rate to cover what government wanted to fund while ignoring the complaints coming from the taxpayers.
I know - I was there and I was paying those increases yearly with no ability to control the increases.
In my mind, the real solution is not to increase the tax revenue to match spending, but make the state budget that is already funded more efficient by strippping out all of the “pork barrel” spending, useless funding of irrelevant studies and commissions that spend millions of dollars annually and contribute nothing but unread and useless reports. Add to this real controls over cost accounting and management willing to enforce the rules and I think you would see billions of dollars per year freed up to spend on worthwhile educational needs and infrastructure improvements.
If the real problem is government spending oversight then revamp the property tax legislation to cap the rate increases and move to a more equitable model. I pay 10X what all my neighbors pay because I just moved into the neighborhood yet I don’t use any more social services than they do.
It seems to me that property tax should be calculated on a combination of factors. First the lot size and square footage of the dwelling should be used for a base price. The assessed value of the property can be used to equalize property tax prices across cities and regions (basically a progressive tax for higher valued homes). Seniors and retirees can be given a discount to help them out.
For corporations it would be a similar equation with breaks for smaller companies based on number of employees and revenues, etc.
Add it all up and property taxes would be shared more equally across
I perceive that the time Prop. 13 passed is not understood — most of the homeowners were young (not over 40), had much lower incomes then, and now are on fixed incomes. We are in our 70’s and 80’s and will be gone soon; then Prop. 13 will be over. Most of us never did plan to move from this lovely area!! Protect the elderly on fixed incomes, please.
Newcomers in Santa Clara County paying for the old time neighbors is totally a rip off.
Newcomers wake up - before you break your purse and thrown out of this county because of foreclosure.
Its unfair and unjust to the core, its time to appeal property taxes.
NEW COMERS WAKE UP AND STOP PAYING HUGE PROPERTY TAXES, ITS TIME TO APPEAL WHEN YOUR PROPERTY IS NOT WORTH THAT MUCH ANYMORE.
HUGE PROPERTY TAXES ARE BREAKING THE BACK OF NEW COMERS.
This is very simple:
A) My neighbour is paying $500, I pay $8000. Justice: I don’t think so.
B) When he dies his son will inherit his tax. Why. Why his son isn’t paying estate tax on the current property value???? Far cry from fairness, pure steal, selfilshly destroying California as end result. Why he inherits multimillion property and pays tax from 40-60 years ago. Ridiculous.
C) If my senior neigbour wants to move he carries his old tax with him.
Again, why? 99% of the time that senior neighbour of yours has so much equity, that a) he doesn’t need any help anymore, and b) you won’t have that kind of equity in next 400 years. It is you that deserves help, not them.
A, B, C = Total BS.
Makes no sense unless you’re parasite who benefits from it.
What should be done:
Same thing as in Europe:
Say property tax is only 0.5% or 0.25% but across the board, no exemptions, and reassess tax yearly. If the property values go down, tax goes down, if property value goes up well …you pay more. If your property tax becomes too high, then well good news for you: that means your property is worth a lot. Sell it and move somewhere else where you can afford tax and you’ll have quite a pocket change.
And who buys those lottery tickets? Thanks for the article, I’ve been making the same arguement for years.