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California’s Folly — Prop. 13
Posted on Jan 26, 2010
Proposition 13 promised to cut California’s high property taxes by some $7 billion per year, from $12 billion to $5 billion. It immediately reduces property-tax bills approximately 57 percent by rolling back the maximum rate of tax to 1 percent of the property’s 1975-76 assessed valuation, and restricts futures levies to 2 percent per year. The initiative further requires a two-thirds majority in both houses of the state legislature to approve increases in any other state tax.
Howard Jarvis, the chief architect of the initiative in concert with Paul Gann, a retired real estate salesman, spent $28,000 to secure 1,264,000 signatures, more than twice the 500,000 need to place his petition on the ballot. And amid the hoopla of his lavish public relations campaign, a number of insidious provisions in the initiative were obscured. For example, Proposition 13 states that property will be assessed at current market value “when purchased, newly constructed, or change in ownership has occurred.”
As houses are built and change hands, they will receive far higher assessments than voters were led to believe. And because families move more often than such corporate giants as Standard Oil, Lockheed, Chevron, and B of A [Bank of America], the heaviest property tax burden must shift from the corporations best able to bear it, to individuals.
Fewer houses will be built as a result of Proposition 13’s requirement of a two-thirds majority of the electorate to pass the bonds that sub-dividers depend upon to finance such public facilities as schools, fire stations, and water works. Because available housing stock will diminish, market prices are bound to soar and with them the taxes new homeowners will have to pay. A less stringent alternative was available to Californians, if they had only been willing to consider it.
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Jarvis made a point of reminding homeowners about their $7 billion windfall. He failed to mention that $2.5 billion will be transferred to the federal government in the form of higher income taxes because Californians will have less property tax to deduct. If corporations and property owners are the winners, the losers are the disadvantaged and the poor. Chanting “limitation” mantras and raising karma, Jerry Brown helped to create the hostile anti-government atmosphere in the state that yielded Proposition 13. In his four years as governor, Brown failed to secure decent tax reform. He accumulated the largest state budget surplus in the nation’s history, and this proved the most effective weapon in the arsenal of the initiative’s advocates.
The surplus, estimated during the campaign at $3 billion to $5 billion, was indeed to be Brown’s ticket to the White House. The governor could only enhance his candidacy in 1980 by pointing to the huge surplus as evidence of his frugality. But Howard Jarvis discovered Brown’s pot of gold, and he beat Brown at his own game. When critics of Proposition 13 objected that its passage would cripple the government’s ability to provide essential human services, Jarvis had only to cite the surplus in rebuttal. It was left to the voter to imagine what would become of those services once the surplus was depleted.
Now that the amendment has passed, Brown speaks as if it had been his own idea from the first. His chidings at the National Governors’ Conference late this summer might have been uttered by Howard Jarvis himself.
Proposition 13 indeed proclaims a message, but it is not the one sung in popular chorus. The [issue] of big government versus small government is moot; big government is here to stay. The real issue is whether government will be dominated by privileged interests and their hucksters or whether ordinary people will have some say through the conventional political process. The paradox of the California referendum is that so many ordinary people voted their power away.
Professor Arthur I. Blaustein teaches Community and Economic Development and Urban Policy at the University of California, Berkeley. He chaired the President’s National Advisory Council on Economic Opportunity under Jimmy Carter. His most recent books are “Make a Difference — America’s Guide to Volunteering and Community Service,” and “The American Promise—Justice and Opportunity.”
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