A Short History of Proposition 13

(Note from the author): Proposition 13, the 1978 property tax measure, continues to be in the news in California with talk of reforms in some quarters. Just this week, the Public Policy Institute of California polled some issues related to Prop 13. The poll found that 66% of likely voters found Prop 13 to be a good thing for California. That included 78% of Republicans, 62% of Independents, and 58% of Democrats. With 13 still making news in California, it is probably an opportune time to publish the text of a speech I gave a few months ago on the history of Proposition 13.)

Let me take you back to 1966 to Newhall, California right here in Los Angeles County, to an item that appeared in the local Newhall Signal newspaper. It came with a picture of an elderly couple standing before their house. It would not be unkind to call it a shack. The house was assessed for taxes at the property’s highest and best use, a standard used by assessors at the time. Since an apartment building had been built close by, this elderly couple’s home was assessed as if an apartment building was built there. The couple’s tax bill, in 1966 dollars, was $1800 a year. Their total income was $1900 a year.

Four years earlier, a retired, civic minded, combative businessman, Howard Jarvis began an effort to reform the property tax system. He said he worked with “ordinary people” to do something about taxes. He called it “grand felony theft” when people, like the Newhall couple, lost their homes to the taxman.

And he wasn’t alone in protesting outrageous taxes. Remember this was about the time George Harrison wrote, and the Beatles’ sang, Should five percent appear too small, Be thankful I don’t take it all, Cause I’m the Taxman.

Howard Jarvis worked 15 years on property tax reform. He submitted or worked on a number of initiative proposals that either didn’t qualify for the ballot or were defeated at the polls.

Meanwhile, the situation got worse. What happened was property values were increasing dramatically in the 1970s—kind of like now. Property taxes are a function of the tax rate and the value of the property. If the tax rates were not adjusted but the property value increased, taxes zoomed up.

In some instances people bribed assessors to keep their property values low and reduce their taxes. Some assessors were caught and they went to prison – one committed suicide. Officials decided something had to be done. They computerized assessments so when a property sold all the property around it would automatically have their assessments increased and their taxes increased with the increased valuation.

In San Francisco, bumper stickers soon appeared that read: “Bring back the crooked assessor!”

Speaking of San Francisco, one San Francisco government official told the San Francisco Chronicle that before Prop 13 ‘the mayor had a relatively easy job, you just add up all your revenues and all your expenses and then you just SOCKED it to the taxpayer.’

That was the environment when Howard Jarvis and Paul Gann combined to get a record number of signatures for Prop 13, in every county, practically all through volunteer signature gatherers.

Many members from both political parties and most of the state’s special interests from business to labor opposed Prop 13. Yet the fund raising was fairly even. The No side had more, and they got it in large donations, but the many small donations from homeowners offset the large donations enough to keep the Yes on 13 side in the game.

Milton Friedman, the Nobel Prize winning economist, made a television ad for Prop 13. Ronald Reagan did a radio ad. Reagan’s radio ad said Prop 13 would protect the American Dream. Marty Anderson, Reagan’s chief economist for the 1980 presidential campaign, told me once 13 passed it gave the Reagan campaign impetus to make taxes a lead issue in the presidential campaign.

While the other side may have had more money, the campaign was high profile and the media helped. KABC-TV in Los Angeles held a debate on the news for 5 to 10 minutes every night for weeks. Howard Jarvis taking on all comers.

It wasn’t a fair fight – for the other guys. Jarvis said, “When you see politicians and bankers and union leaders standing together against something you’re for, you know there is no way in the world you can be wrong.”

Prop 13 passed two to one on Election Day, June 6, 1978. It capped the property tax rate, allowed a limited increase for inflation, reassessments on sale of property, and required a supermajority vote in the legislature for state taxes and a vote of the people on local tax increases.

It was challenged in the courts, of course. The California Supreme Court said it was constitutional…that the acquisition value system—taxes are set when you acquired the property—was reasonable and fairer than the system in place before 13.

But that wasn’t the only court challenge. In the early 1990s, a Prop 13 case made it to the United States Supreme Court.

This delighted the folks who had longed hope to see the end of Prop 13. The Long Beach Press editorial the morning of the hearing before the U.S. Supreme Court cried, “Off with its Head!”

Didn’t work out that way. As with the California Supreme Court, there was only one dissenting vote against Prop 13.

Justice Harry Blackmun, who wrote the majority opinion, found Prop 13 was constitutional, that the state had a legitimate interest in neighborhood preservation and stability and could set tax laws to discourage rapid turnover of property in homes and businesses to discourage displacement of mom and pop stores by newer chain operations.

Blackmun also wrote that someone acquiring property doesn’t require the same protection as someone who owns property and could be subjected to jarring tax increases.

The case against Prop 13 was based on the issue that side-by-side similar properties pay different taxes. Renowned economist Adam Smith in his work, Wealth of Nations, said certainty in taxation was much more important than equality. However, I prefer how a writer in a Northern California newspaper put it. Proposition 13 reminded her of her grandmother’s quilt. It is made up of different patches but sewn together it keeps everyone warm.

Even with Prop 13 upheld by the courts it comes under constant attack as you know.

From the ridiculous – a track coach said his shot puts were lost in tall grass because the grass was not cut as frequently because of Prop 13, to the more serious, when the Bakersfield Californian newspaper asked: Is Proposition 13 killing children because we don’t have enough measles serum in this county? To the editorial cartoon in the Los Angeles Times after the Loma Prieta earthquake in the Bay Area that showed a car crushed by a freeway and the license plate read, Prop 13. And my favorite in the New Republic, which said the reason O.J. Simpson was found not guilty in his criminal trial was because of Proposition 13. The reasoning was that because of the tax cuts Los Angeles city and county did not have the funds to hire competent police and corner officials. No matter that at that time, LAPD officers were paid more than police in New York and Chicago.

Which is why Howard Jarvis created a taxpayer organization, the Howard Jarvis Taxpayers Association, to carry on the fight and the defense of Prop 13. As Howard used to say, “A ship can’t sail on yesterday’s wind.”

Prop 13 was revolutionary because for the first time it gave certainty to the taxpayer instead of the tax collector.

Finally let me close with the following assessment of Prop 13 when it hit it’s 20th anniversary: “Proposition 13 is 20 years old and it’s time to proclaim the tax cutting measure a stunning success. The brainchild of Howard Jarvis and others has been vilified by critics for two decades and blamed for much of what ails California. But, at the heart of it, the measure did exactly what Jarvis promised …Proposition 13 provided a substantial and permanent reduction in soaring property tax levels and brought stability to a tax system that had been rife with corruption and subject to the volatile whims of the housing market.”

So said the Editorial in —ready for it –the Los Angeles Times!

Originally published on Fox and Hounds Daily

VIDEO: Jon Coupal on the California State Budget

California state spending has increased 30 percent in the last five years, even with the recession. The Howard Jarvis Taxpayers Association is concerned about the level of spending and the level of debt.

For What Are Taxpayers Thankful in 2014?

“In this season of Thanksgiving, please don’t blame taxpayers if they are distracted by the injuries being perpetrated against them by our political class.”  These words were the preface of this column at the beginning of the holiday season in 2008 and, sadly, little has changed.  In fact, in many ways taxpayers are worse off now than they were then.

Six years ago, California’s tax burden was ranked 6th nationally.  Today we trail only New York as the worst state for taxpayers.   We now rank first in state sales tax, first in marginal income tax rates, first in gasoline tax and, even with Proposition 13, we rank in the top third in per capita property taxes.  Because Proposition 13 makes it harder for California to overtake New York as our nation’s number one taxpayer hell, one can expect new efforts by Sacramento politicians to undermine its protections in the new legislative session.

Some of our state leaders like to chirp happily about California’s declining unemployment rate, but only three states are worse off and our 7.3 percent rate is much higher than the national rate of 5.8 percent.  Still, all these figures are suspect because they do not count the discouraged who have stopped looking for work entirely.  And even those counted include many part-time workers for whom the best holiday gift would be finding fulltime employment.

Then there is the constantly growing, and largely ignored unfunded pension liability now estimated at several hundred billion. It stood at $6.3 billion just a decade ago.  As more government workers retire, this debt will come due and will have to be addressed by either reduced public services or tax increases or both.  The pressure for new revenue to support the retired workforce will provide an additional incentive to politicians to demolish Proposition 13’s taxpayer protections.

Nonetheless, while elected officials may be planning to put coal in taxpayers’ stockings as we approach Christmas, there are a few things for which we can all be grateful.

First is Proposition 13, which limits annual increases in property taxes and forces the tax raisers in the Legislature to get a two-thirds vote of their colleagues to raise state taxes.   We at the Howard Jarvis Taxpayers Association hear daily from those who are thankful for Proposition 13 and credit its most famous feature — limiting annual property tax increases to no more than 2 percent — for allowing them to keep their homes.

While during the session just passed, those favoring new taxes dominated the Legislature, the November election has turned out some fiscally irresponsible lawmakers and replaced them with some who understand the detrimental impact of new taxes on individual taxpayers and the overall economy, and who are likely to reject new taxes.  So taxpayers are grateful not only for Proposition 13 but for lawmakers who will defend their interests against great pressure for new taxes from special interests including public employee unions.

Taxpayers are also thankful for all individuals, regardless of party affiliation, who make the personal sacrifice to run for office and present their ideas to voters.  A functioning free republic relies on individuals who are willing to step into the arena, even in those instances where their chances of prevailing are small.

Finally, complaints against government at all levels are an American birthright.  But we are mindful that billions of souls around the world risk imprisonment or death for speaking out against their despotic governments or leaders.  So, in keeping with the season, let us be thankful that we live in a country that, despite her faults, remains the last, best hope for mankind.

Greater Transparency on Threat to Property Owners

Legislation just signed by Gov. Brown may help alert homeowners to the threat posed by per parcel property taxes. Parcel taxes have become one of the most insidious threats to home ownership because they can be imposed over and above the property tax limits set by Proposition 13.

Supported by a broad coalition lead by the California Taxpayers Association and the Howard Jarvis Taxpayers Association, Assembly Bill 2109 requires the Controller to maintain a publicly accessible data base relating to the imposition of locally assessed parcel taxes, including the type and rate of a parcel tax and the number of parcels subject to or exempt from the parcel tax. Finally, taxpayers will be able to see the extent of parcel taxes throughout the state and the costs to property owners.

Parcel taxes came about as a result of politicians never ending effort to circumvent the property tax limitations contained in Proposition 13. Howard Jarvis and Paul Gann, Proposition 13’s authors, intended that taxes on property be limited to one percent of the taxable value and that the taxable value on the assessor’s books could not be increased by more than two percent annually.

To squeeze more from homeowners, local officials came up with the parcel tax, usually a uniform tax placed on each parcel of property within a community –although it can also be based on size. By imposing a uniform charge for the privilege of owning property within a community, they were able to persuade the courts that it did not violate Proposition 13’ prohibition against additional ad valorem (value based) taxes.

Parcel taxes are extremely regressive, bearing no relationship to ability to pay. The young couple in a starter home, the elderly couple in a bungalow and a multimillionaire in a mansion, all pay the same amount. There is no restriction on the dollar amount of these taxes that exceed Proposition 13’s limits, or on the number of such proposals that can be placed on the ballot. And while bonds — also paid for by property owners — must be used for “brick and mortar” construction, parcel taxes can be used for any purpose including increased pay and pensions for government employees.

Adding insult to injury, there has been a major push in the Legislature to reduce the two-thirds vote needed to approve parcel taxes. Although this would clearly undermine Proposition 13 by making it easier to increase property taxes, backers of a lower approval threshold respond innocently, “We are not trying to raise taxes, we are just making the process more democratic.” The threat of course is that by making it much easier to impose new taxes on property owners, home ownership could again be threatened as it was prior to Proposition 13 when taxes were going up so fast that many owners were forced to give up their homes.

Thanks to Assembly Bill 2109, more attention can be brought to the burden that parcel taxes impose on California homeowners and it will help make the case that not only should they be defeated individually as they appear on the ballot, but they should be banned outright.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article originally appeared on HJTA.org

Green energy boondoggle raises costs while killing jobs and birds

You have to wonder if most California politicians simply can’t stand the notion of a thriving economy.  In a move that will have a devastating effect on jobs and on the pocketbooks of regular citizens, Jerry Brown recently signed legislation that will dramatically increase the amount of costly “green” energy California’s citizens will be forced to purchase.

In this time of record high unemployment, the political class should focus on stimulating the economy to create jobs.  Instead, the politicians have imposed a new mandate called “renewable portfolio standard” or RPS which decrees that 33% of our energy needs to be green by 2020 – as of right now, we have not even met the 20% target that was set for 2010.

Statistics from the Department of Energy show that renewable energy, as defined by the RPS mandate, can cost three or four times as much as traditional energy on a per-megawatt basis.  Higher electricity bills will further strain taxpayers’ budgets and lead to even more job losses.  The US Bureau of Statistics just released a report saying California lost 572,400 manufacturing jobs over the last decade, and our unemployment is now a full two percentage points worse than Michigan, a state famous for Detroit and its poorly performing economy.

In fact, California’s environmental regulations are so extreme that the majority of the renewable power we will be forced to buy will not even be produced in this state but imported from Mexico, Canada and other states.  While the political class likes the idea of green energy, getting any type of power plant built in California is difficult in a state as tangled in government red tape as ours.

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