Prop. 13 is still third rail of California politics

2020 was supposed to be the year – the year when Proposition 13’s enemies finally inflicted a near fatal wound on the iconic property tax reduction initiative adopted by voters more than 40 years ago. As of this writing it appears that they have come up short.

Since 1978, tax-and-spend interests – mostly public sector labor organizations – have chafed under Prop. 13’s one percent limit on the property tax rate and the two percent limit on annual increases in assessed valuation. But even the most recent Public Policy Institute of California poll revealed that at least 60 percent  of Californians viewed Prop. 13 as “mostly a good thing.” That level of support for Prop. 13 is remarkable given California’s increasing embrace of other progressive policies.  This is now a deep blue state with Democratic supermajorities in both houses of the legislature and conservative statewide office holders are nowhere to be found. To say this is no longer the California of Ronald Reagan is an understatement.

Knowing that Prop. 13 retained high levels of support, especially among homeowners fearful of being taxed out of their homes, progressives thought they could repeal Prop. 13 incrementally. So it made sense that they would first target those evil corporations like Chevron and Disney. (Who knew Mickey Mouse was so dangerous?)

But targeting what they believed were unpopular businesses was just one of their perceived paths to victory. They also projected that the 2020 general election would have much higher turnout than other elections because of the divisive presidential contest. Add to that a virtually endless supply of campaign cash and a complicit Attorney General who gave them a highly favorable ballot label that didn’t mention “tax increase,” and they assumed that the first step in taking down Prop. 13 was in the bag.

But a funny thing happened on the way to the polls. First, homeowners were rightfully concerned that a $12 billion property tax increase on businesses would translate into a higher cost of living. Moreover, homeowners were on to progressives’ long-term agenda of coming after them next. They took to heart Benjamin Franklin’s admonition that “we either hang together or hang separately” and so stood shoulder to shoulder with the business community against this assault.

Second, backers of Prop. 15 apparently hadn’t done all their homework given that they hadn’t considered the damage “split roll” would inflict on all businesses, not just large corporations. The vast majority of small businesses rent their property under the terms of a “triple net lease” leaving them on the hook for all the tax hikes imposed on their landlords.

Third, opposition to split roll came from places proponents should have anticipated but didn’t. While Prop. 15 exempted farm land, much of agricultural production relies on commercial infrastructure. Think of dairies and wineries. And, in a rare move, the normally non-political California Assessors Association opposed Prop. 15 because of its absurd complexity and implementation costs.

Fourth, voters generally, not just homeowners, believe that government wastes too much money to be given any more without significant reforms. This isn’t a partisan perception. Voters even in heavily Democratic jurisdictions have been rejecting tax and bond proposals at higher rates than in the past.

Finally, there is the name itself: Proposition 13. Like it or not, Prop. 13 has almost mythical powers against those who would assail it. And the apparent defeat of the split roll proposal is only the most recent example of special interests getting burned by the “third rail” of California politics.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.