CA renter, we agree on the main facts, but I come to different conclusions.
First, a primer on what Prop 13 did. Throughout the 1970s, property values rose rapidly in CA, and tax assessments rose accordingly. Taxes averaged about 2% of value, roughly in line with the national average. Homeowners were seeing their tax bills rise astronomically, fueling voter anger, especially when they saw local tax revenues soar and surpluses generated. They understandably felt local governments would simply find more wasteful ways to spend it. Crusty old conservative Howard Jarvis capitalized on this anger by proposing an easy-to-understand blunt instrument: Limit all property taxes to 1% of the property’s value, and only allow that amount to increase by 2% a year, no matter what inflation is (which was then soaring). This was easy to understand by the angry voters, but also contained problems. In the long run it created unfairness in that it favored those who stayed put in their homes while their neighbors sold and created a new higher assessment for that neighbor and resulting tax. It also favored business property where changes in ownership or shares did not prompt an actual property sale and resulting higher property value and tax.
We live with these inequities today, and I’d be happy to see them fixed even though that would upset a lot of people.
Now back to where CA Renter and I agree on the facts but come to different conclusions.
I buy the claim that the accumulated surplus would be $10 billion from 1970 to 1978 had Prop 13 not passed. But voters were angry that government was piling up surpluses, profiting from the massive inflation and even faster rise in property values during the 1970s, while widows were being taxed out of their houses. They rightly suspected governments should rein in their spending instead of hiking tax revenues by 10 – 20% per house per year. So they flocked to Jarvis’ crude instrument of Prop 13, however imperfect it was.
CA Renter also stated that 28% of voters believed government could cut 40% of tax revenues without cutting services. I can accept that statement because 1) Many examples of government waste were cited by Jarvis, as well as government surpluses as they couldn’t spend it fast enough, and 2) 28% is not that high a number (72%, after all, do not agree).
In sum, Prop 13 passed because of voters’ anger, by a nearly 2 to 1 ratio. Then-governor Brown was solidly against it, but afterward embraced it, even claimed some credit for it. The huge drop in property tax revenues was offset by the state taking over the financing of many local functions, especially in education. Local school districts lost much of their autonomy and surrendered to state controls, to their detriment. That’s why our income and sales taxes remain so high, while our property taxes paid per homeowner are roughly at the national average (CA homes are higher in value than the national average).
