Posted by Tina
Since this measure passed in 1978 with overwhelming support it has been blamed for every state funding problem under the sun including a collapsed Bridge in the 1988 Bay Area earthquake and a lousy coroner in the OJ Simpson trial in LA. But school funding, police and fire, the prison system, and healthcare are the biggest sticks used by politicians and big government progressives as they attempt to beat the taxpayer into guilty acquiescence over
prop 13. Before buying into their claims it would be wise for the taxpaying public to gather a few facts and consider other points of view.
Lets begin with a simple explanation of Prop 13 from the Howard Jarvis Taxpayers Association:
Proposition 13: A Look Back, by Joel Fox
On June 6th, 1978, nearly two-thirds of California’s voters passed Proposition 13, reducing property tax rates on homes, businesses, and farms by about 57%. Now, according to the newly amended state constitution property tax rates could not exceed 1 percent of the property’s market value and valuations couldnt grow by more than 2% per annum unless the property was sold. ** Prior to Proposition 13, the tax rate throughout California averaged a little less than 3% of market value, and there were no limits on increases either for the tax rate or property value assessments. Some properties were reassessed 50% to 100% in just one year and their owners tax bills jumped correspondingly. ** Under the tax cut measure, property tax valuation was set at the 1976 assessed value. As stated above, property tax increases on any given property were limited to no more than 2 % a year as long as the property was not sold. Once sold, the property was reassessed at 1% of the new market value with the 2% yearly cap placed on this new assessment. Thus, the new buyer is aware of what the taxes will be and knows the maximum amount property taxes can increase each year for as long as he or she owns the property. ** In addition, Proposition 13 required that all state tax rate increases be approved by a two-thirds vote of the legislature and that local tax rates also have to be approved by a vote of the people. The people’s right to vote on taxes is a key taxpayer protection.
Proposition 13 has been successful at what it promised to do. It prevented people from being taxed out of their homes and for the first time gave taxpayers a measure of certainty over their taxes. ** A study by the University of California at Davis found that under Prop 13 low and middle income people, on average, pay less in taxes than they would have paid under the former property tax system. ** The study’s authors wrote that if Los Angeles County reverted to the market value property tax system in which property was revalued every year at its current value, and the tax rate were lowered so that the revenue collection would be equal to what was collected from the property tax the year before: “We estimate that this policy would adversely affect elderly and low-income households. In fact, according to our calculations, 92% of the elderly would lose under this revenue neutral reform.”
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Next I turned to the Cato Institute where I found two very informative articles. The first article was posted at cato.org in July of 1998
Proposition 13 Then, Now and Forever, by Stephen Moore
Within five years of Proposition 13’s passage, nearly half the states strapped a similar straitjacket on politicians’ tax-raising capabilities. Almost all of those tax limitation measures remain the law of the land today. ** Money ran a cover story back in 1994 by Richard Reeves titled “The Tax Revolt That Ruined California.” The article blamed the recession, the loss of 600,000 jobs and the decline in family incomes in the early 1990s on the cumulative effects of Proposition 13. No mention was made of the fact that in 1991 California passed the biggest tax increase ($7 billion) in the history of any state in the Union. ** The argument that Howard Jarvis’s brainchild wrecked California was recast by a National Public Radio “news” segment earlier this month. Proposition 13 “drained the California school system of money,” noted the NPR piece. “Since then California’s test scores have gone from near the top of all the states to near the bottom.” ** But what is not saidis that Proposition 13 ushered in a second California gold rush in the 1980s. California’s economic surge in the years following Proposition 13 was to become the envy of the nation. In the 10 years after the passage of Proposition 13, incomes in California grew 50 percent faster than in the nation as a whole; jobs grew at twice the national pace. Even supporters of Proposition 13 never envisioned that it would unleash the spectacular entrepreneurial and commercial explosion that it did over the next decade. ** Did Proposition 13 really starve state and local services? Hardly. In real dollars, California’s budget climbed from $55 billion in 1980 to $97 billion in 1992 — a 75 percent increase above inflation! Only in government would a 75 percent real spending hike be considered inadequate and neglectful. What about revenues? In the 1980s state tax revenues as a share of Californian’s incomes actually rose — from 11 to 12 percent. ** The major effect of Proposition 13 has been to save the average homeowner in California tens of thousands of dollars in property tax payments over the past 20 years. That is money that would have fueled an even more rapid buildup in California’s state and local public bureaucracies if it had been sent to Sacramento and city hall.
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The problem isnt that Californians dont give the state enough revenue; its that the state is a very poor manager of our money. Politicians, driven by a desire for power and job security ask for more money and promise to improve services (and even our lives) but they fail to adequately assess all of the consequences of the laws they pass. They also fail to take into consideration the waste and fraud that is bound to occur in a bloated bureaucracy when no one is minding the store. Id rather they adopt a higher sense of civic responsibility, keeping government small so that oversight might begin to have a prayer:
Proposition 13 and State Budget Limitations: Past Successes and Future Options, by Michael New
Although Proposition 13 limited property taxes, it failed to impose long-term discipline on state and local budgets in California. Indeed, total state and local revenues (including federal aid) in California have risen from 19.4 percent of personal income the year after Proposition 13 passed to 24.6 percent today. Rapidly expanding spending since the mid-1990s has put the state into a fiscal crisis with record budget gaps currently being reported. ** Proposition 13’s focus on property taxes was too narrow to limit overall state and local government budgets in California. However, a number of states in the past decade have enacted broader tax and expenditure limitations (TELs) that attempt to control overall government growth. This paper discusses how well-designed TELs can restrain spending and provide tax relief. TELs combined with other mechanisms to terminate unneeded government programs should be pursued in all state and local jurisdictions to close current budget gaps and counteract the tendency of governments to collect ever-larger shares of Americans’ income.
Granted, these articles are not al current but they represent an overall view of both the intent and the effects of proposition 13.
The problems facing California today have been brewing for a very long time. The causes are many and varied but the bottom line is irresponsible spending and lack of accountability at all levels of state government and government that tries to do too much. Tax policy that has the potential to remove families, including the poor, middle class, and the elderly, from their homes is not a tax policy that serves the people. Prop 13 was a necessary measure designed to end this consequence and restrain the whims and proclivities of politicians. We could use a few more such measures.