Editor’s note: This commentary was published in the June 4 print editions of the newspaper as part of a pro-con debate page about Proposition 13. For the counterpoint, click here.
Last week, I was reminded yet again why Proposition 13 remains so popular. The nonpartisan Tax Foundation produces maps of the United States ranking the states by various metrics. Invariably, California is assigned the color of the worst ranking, whether by income tax, gas tax, sales tax, etc. But last week, another ranking had California 19th highest, rather than dead last. What could cause such good news? Had our political leaders come to their senses and stopped adopting policies that hurt productive citizens and businesses? Of course not. The (relatively) high ranking of our property tax system was solely due to Prop. 13.
To the frustration of California’s tax and spend lobby, Proposition 13’s popularity remains high as evidenced by both polling and voter rejection of anti-Proposition 13 ballot measures.
Among the multitude of myths about Prop. 13 is the claim that it has decimated school funding. But that is provably false. California is spending at least 150% more in per-student, inflation-adjusted dollars than we were just prior to Prop. 13’s enactment. Even the president of the California Teachers Association recently stated, “Per-pupil spending next school year would hit about $22,000 per pupil. If you need a little context for that figure, just 12 years ago we were at $7,000 per pupil. We’ve tripled per pupil funding in a little more than a decade.” California’s public education system is broken and has an endless array of problems. But lack of money is not one of them.
Let’s lay to rest the notion that Proposition 13 has starved local government of revenue. The fact is that the increase in property tax revenue coming into local government has far exceeded population and inflation. And while California now has the highest income tax rate, sales tax rate, and gas tax in America, we remain in the top third (14th out of 50) in per-capita property tax collections.
The same people who have always wanted to destroy Proposition 13 so they can raise taxes even higher are now claiming that Prop. 13 must go because it has caused “inequities.” Actually, Proposition 13 is working precisely as intended to achieve a sustainable balance between tax stability and revenue growth. Because Proposition 13 uses acquisition value (usually the purchase price) as a basis of taxation and not current market value, it is possible for owners of similar properties to have significantly different tax bills. In short, the system generally favors those who have owned their property for longer periods of time. But that’s a feature, not a bug.
To understand why Proposition 13 is fair one must understand how it works. Proposition 13 limits property taxes by both limiting the maximum rate (1%) and, more importantly, by limiting increases in assessed valuation (2% annually). With the latter provision, a property’s current market value can exceed its taxable value over the span of just a few years.
But Proposition 13 provides big benefits even to those who recently purchased a home. It treats equally those who purchase property of similar value at the same time while also providing certainty to homeowners and businesses as to what their tax bills will be in all future years. No longer are property owners subject to the vagaries of the real estate market, something over which they have no control.
The California Supreme Court recognized Proposition 13’s inherent fairness shortly after its adoption by the voters in saying “an acquisition value system … may operate on a fairer basis than a current value approach.”
Limitations on annual increases in taxable value have been so successful that other states have adopted similar restrictions, including that bastion of conservatism, New York state.
Having lost on all the substantive arguments against Prop. 13, progressives have resorted to the last grievance available to them: That Prop. 13 is racist. But this, too, is laughable.
In rejecting an Equal Protection attack against Prop. 13, the U.S. Supreme Court noted that Proposition 13 advanced the “legitimate interest in local neighborhood preservation, continuity, and stability,” and that Prop. 13 restructured the state’s tax system to one that discouraged “rapid turnover in ownership of homes and businesses, for example, in order to inhibit displacement of lower income families by the forces of gentrification.” (Ask Black homeowners in Oakland if they would like their homes reassessed to full market value).
Those assailing Proposition 13 should abandon their arcane and absurd arguments and just say what they really want: More money.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.