Prop. 13 Report from Legislative Analyst Elicits Mixed Reactions

property taxTwo weeks ago, the California Legislative Analyst released a report entitled “Common Claims About Proposition 13.” On balance, the report was a (mostly) objective view about California’s landmark property tax reduction measure.

As the title of the report implies, there are many claims about Prop. 13, what it does and what it doesn’t do. In fact, we at Howard Jarvis Taxpayers Association have collected a lengthy list of “myths” about Prop. 13 that are deeply ensconced in urban legend. For example, the monolithic education bureaucracy repeatedly claims that Prop. 13 starved public education in California. But the fact is that we now spend 30 percent more on a per student, inflation adjusted basis than we did just prior to Prop. 13’s passage – a time in which there is broad consensus that education in California was the best in the nation. Whatever it is that caused the decline in the quality of public education, it certainly hasn’t been the lack of revenue.

The release of the LAO report instigated a great deal of reaction, ranging from cheers to jeers depending on one’s pre-conceived opinions about Prop. 13. Every interest group, it seems, has cherry picked the report to confirm what they already believe. But objectively, for Prop. 13 defenders, we see much in the report that supports what we’ve been saying for decades.

Abraham Lincoln is quoted as saying, “We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.” Here are the “roses” we see in the report:

First, the report says that residential and commercial properties turn over at about the same rate, and that Prop. 13 is not the cause of this. It also says that residential property tax growth is only slightly more than that from business properties, but this is due to greater residential development. This runs directly counter to those who desire to strip Prop. 13 protections from business properties.

Second, the report states that small businesses pay less in property tax because of Proposition 13, and that Prop. 13 does not serve as a disincentive to create small businesses. This busts another bubble floated by Prop. 13’s detractors.

Third, and most importantly for the Jarvis faithful comprised of senior homeowners, the report shows that assessed valuation limits provide greater security to retirees.

About the only item in the report that Prop. 13 haters can point to is the LAO’s conclusion that wealthy Californians, who own higher value properties, have benefited more than those with modest homes. But to this we respond with a resounding “Duh.” Obviously, given that Prop. 13’s rate limits and limits on increases in taxable value apply equally to all property, those with more expensive properties will benefit more. Prop. 13’s protections were never designed to be means tested. It provides the same rules to every property owner in California, from the owners of modest bungalows to mansions and from small mom and pop businesses to corporations. It doesn’t pick winners and losers. Only winners.

As California’s leading defender of Proposition 13, we have only a few of quibbles with the LAO report. Here, we will discuss only one. Specifically, the report makes much of the fact that local governments had the power to reduce tax rates prior to Prop. 13’s enactment in 1978 and that this – it is implied – offset the rapid increases in taxable value that homeowners were experiencing. This is true, but in theory only. In reality, while local governments had that power, they didn’t use it. Reductions in tax rates in no way even closely offset increases in taxable values. How do we know this? Simple. Against every special interest and editorial in California, voters – by a 66 percent margin – launched the modern tax revolt known as Prop. 13. All that was missing were the torches and pitchforks. If tax rates had indeed been reduced, this revolt would never have happened.

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 piece was originally published by HJTA.org