This Wednesday, the 6th of June, the Western democracies will commemorate the Normandy invasion that marked the beginning of the end of Fascist tyranny in Europe. On the same date, Californians will also celebrate a second liberation, the passage of Proposition 13 which 35 years ago reined in the onerous property tax system and made the passage of new taxes more democratic.
After three and a half decades, polls show Proposition 13 as popular now as it was the day it passed. Still, a divide on the issue remains, with the overwhelming majority of average folks supporting the tax limiting measure and a minority – primarily special interests that benefit from government spending, politicians who are in the pockets of those interests, a few leftist professors from taxpayers supported universities and, of course, editors at some of the state’s largest newspapers – remain dogged in their opposition.
For most Proposition 13 opponents, like the public employee union bosses, their opposition is all about money and getting more of it from taxpayers. Others, in the “chardonnay and brie set,” object to the bottom up origin of the 1978 tax revolt that carried Proposition 13 to victory. These folks are always uncomfortable with ideas that are popular with those who they see as part of the “great unwashed.”
However, the majority knew exactly what they were doing when they approved Proposition 13 by a nearly two-to-one margin. They saw that property taxes were out of control — in some areas actually doubling in the duration of a single year — and friends and neighbors were being forced from their homes. They saw clearly the benefit of a tax system that would limit annual tax increases and make property taxes predictable from year to year. By lowering the tax rate from nearly three percent, to one percent and restricting annual increases in assessed value to two percent, Proposition 13 provided a stable system for all, including government agencies that depend on property taxes.
Still, the opposition continues to try to gin up discontent against the tax limiting measure, using absurd and sometimes insidious arguments.
Critics whine about fairness, like children in a school yard shouting “no fair, no fair.” They point out that in some neighborhoods a recent homebuyer is paying more in taxes than a neighbor who has owned their home for thirty, twenty or even ten years.
This, they claim, shows that the tax burden is being born by the young, while older property owners reap the benefit. Of course, this is nonsense. The longtime owner has been paying property taxes for years – property taxes that built the infrastructure the new buyer now enjoys – and they began paying based on what they could afford to pay for their home at the time of purchase. The new buyer is in the exact same position, in that his or her taxes are based on what they can afford now, and they, too, enjoy the benefit of knowing what their taxes will be in the future.
What Proposition 13 provides to both new and longtime homeowners alike, whatever their age, is certainty and security in taxation. And the critics of this system are not in the least bit concerned about “fairness”; they are looking for more money from the older owners.
For those who wonder what good Proposition 13 is to renters, consider that by limiting annual increases in property taxes, it reduces the pressure on owners to increase rents.
And all taxpayers, whether property owners or not, benefit from Proposition 13’s requirement that local voters be given the final say on local tax increases, like those on utility services.
Finally, even government benefits from the Proposition 13 system. When times are tough, both income and sales tax receipts plummet, but due to Proposition 13’s acquisition value system, in most years, property tax revenue continues to increase, and if it declines, the reduction will be very modest. It should be noted that property tax receipts were $4.9 billion in 1978-79, but by 2010-11 property revenue had seen a tenfold increase to $49 billion per year – an increase that is two and a half times the rate of inflation over the same period — providing a healthy revenue stream to local governments.
So after 35 years, Proposition 13 has proved it has something for everybody by providing stability to our property tax system, protecting all taxpayers from unreasonable taxation, and by providing a healthy revenue stream to government. What’s not to like?
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Jon Coupal is President of the Howard Jarvis Taxpayers Association.