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This article originally appeared on the blog of Demos, a progressive policy and research group.

Ronald Reagan's hologram may not have shown up  to the Republican convention to extoll the virtues of draconian government cuts, but the anti-tax movement that launched his political career continues to strangle California's government. That's because the movement has continued to define the state's finances with a decades-old proposition leading to yearly budget crises. 

But despite government cutbacks driven by this dysfunction, California has pulled off a miracle. In contrast to every other year of the recovery, this year the state beat Texas to create the most jobs in the country, adding 365,000 new jobs to Texas’ 222,000, the most jobs that California's added since the dotcom bubble of the 2000s.


Jerry_Brown_1978
Governor Jerry Brown aggressively campaigned against Proposition 13 in 1978, rightly asserting the proposition would devastate government services. (Photo by Alan Light)

That's in spite of major challenges and caveats. California’s job growth has often been compared unfavorably with Texas’, but there are two sides to every coin. Both are enormous and important economies: on its own California would be the 9th largest economy in the world, Texas the 15th. Though Texas led the country in job growth and has an unemployment rate below the national average, California has lagged behind. The flip-side Texas has been in the business of creating low-wage, benefit-poor jobs, while California struggled to provide sufficient jobs that provided decent benefits and a higher minimum wage. Ten percent of Texans earn a minimum wage, above the country’s average and a fourth lack health insurance. Texas’ economic miracle may not be so miraculous after all.

Conservatives like to criticize California as a fiscal basket-case, a homegrown socialist nightmare. "Entrepreneurs and businesspeople around the world and here at home think that at some point America is going to become like Greece or like Spain or Italy," Mitt Romney quipped on the campaign trail. "Or like California - just kidding about that one, in some ways." 

California’s chronic deficits aren’t the fault of out of control spending, as conservatives would have you believe. Quite the contrary, it’s inefficient and poorly planned taxation that produces frequent fiscal crises. Immediately prior to Reagan’s ascendance to the Presidency in 1980, the conservative antitax movement coalesced around the hugely popular Proposition 13. The proposition mandated that property taxes never rise above 1%. It also ensured that the state would be unable to raise taxes without the approval of a supermajority, two-thirds, of the legislature.

The result? Gridlock and frustrating governance.

California, which had built a university system and public infrastructure that was the envy of the world, has been hobbled ever since. The Economist on the implications:

California's budget problems begin with a tax system that is out of date. For most of the last century, sales taxes, which are relatively stable, were the state's main source of revenue, while more volatile income taxes were less important. But that was when California's economy was still based on making things. Today it is a service economy, and services are exempt from sales tax. So, over the past generation, income taxes, and especially capital-gains taxes, have grown in importance. This makes California's revenues unusually jumpy, with peaks during booms (in dotcoms or housing, say) and big falls during busts (again, in dotcoms or housing).

In the midst of recessions, when you need it most, government is forced to recede. That's why the recession has been more severe in California than the rest of the country, with the state ranked third to last in unemployment. Property taxes fund public schools. With Proposition 13 artifically deflating property tax values, the state's forced to make up the difference. And continously struggle to do so.

We’re only now beginning to see Proposition 13 bear its ugly fruit. Job growth stifled due to government cutbacks through the recovery, insufficient revenue to repair crumbling infrastructure, rising tuition at public universities, and three cities declared bankrupt this year. All of these setbacks hamper the state’s ability to mount a robust recovery and the added burden of Proposition 13 forces it to engage in austerity just when unemployment is the most severe. It's a recipe for disaster.

Prop 13 keeps tax revenues stable, and too low to support a sufficient investment in education. There's a reason that California is among the states with the lowest amount of educational investment per pupil. Despite such a high tax burden, Californians aren't getting a bang for their buck. It makes the state have to raise other taxes in order to compensate for the missing revenue, which hurts employment during recessions when capital gains and income taxes collapse.

Conservatives love to cite surveys that find California has an "anti-business" climate as a result of too high of taxes. But those surveys are highly inaccurate, using the same simplistic ideology that permeates the modern Republican party, because they only measure the posted tax rates. Prop 13's insidious genius is that it prevents reappraisals of home prices, making the lost revenue invisible.

It's no coincidence that Texas, not a huge state spender, has the 3rd highest property tax rate in the country. California's compensated for too low local taxes through a variety of alternate and less efficient tax structures and by shifting the cost of education from the local to state control. That's a mistake. As a result, California spends far less per pupil than other states, ranked 47th in the country.

The state’s problems are a microcosm for the country’s. The federal government, much like California, has been forced to engage in reckless austerity in the wake of the Great Recession. How do you create jobs, balance your budget, and maintain a reasonable safety net in the face of self-imposed tax restrictions?

California is less what happens when socialists run a state than what happens when the antitax right gets its hands on budget. Given its structural impediment, it's a miracle that California beat Texas in job creation this year. But California is still mired at 10.7% unemployment. In the longterm, its clear that the hugely popular Proposition 13 is a source of California’s budget malaise. It needs to be overturned.

In the immediate term, California voters will have an opportunity this November to do what they've never done before: vote by popular referendum to raise taxes. Their decision will be a microcosm of the national debate as they decide whether they want to dramatically reduce public services or to raise taxes on the wealthy. Should they choose the former, job growth will suffer in the face of severe cutbacks in crucial state services. With the latter, the California recovery may live on. 

Originally posted to Cup of Joe on Sat Sep 08, 2012 at 12:48 PM PDT.

Also republished by Community Spotlight.

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Comment Preferences

  •  This is an important and needed diary, thanks. (17+ / 0-)

    Yes, I know all about Prop 13 (OK, not "all." I've never read the thing :) But I was living in California--enrolled in public school--at the time of its passage, and I live here still. In terms of unintended consequences, what an unmitigated disaster.

    To drown out the anti-tax bigots who are basically holding this state hostage--to modify Prop 13--we need talking points. To derive good talking points, we need to acknowledge the "good" parts of Prop 13, i.e., it keeps people in their homes, who would otherwise be taxed out of them. But doesn't some other part of Prop 13 give tax breaks to corporations? THAT'S what we need to go in for, making the distinction memorably for the public.

    Thanks again for the diary. Tipped and rec'd.

    It's here they got the range/ and the machinery for change/ and it's here they got the spiritual thirst. --Leonard Cohen

    by karmsy on Sat Sep 08, 2012 at 01:31:42 PM PDT

    •  I'm not sure (11+ / 0-)

      this was ever true

      >> keeps people in their homes, who would otherwise be taxed out of them

      I think the idea that people were being "taxed out of their homes" was the first really successful right wing big lie, direct ancestor of Harry + Louise, the swift boat liars, and claims about "death panels".

      "Great is the guilt of an unnecessary war" - John Adams

      by esquimaux on Sat Sep 08, 2012 at 02:56:59 PM PDT

      [ Parent ]

      •  I'm just not sure this is correct, in the absence (7+ / 0-)

        of either hard evidence, or a good argument. I don't really think  you know more than I do :) about this, in other words.

        As I recall, it was a broad-based grassroots effort (petitioners with ironing-boards, collecting signatures at the supermarket) that put Prop 13 on the ballot, then passed it. There was something behind this bill besides RW bamboozling; people really felt that they were voting for something concrete that would advance their interests.

        The RW bamboozling might have come in "piggybacking" legislation on the bill that needlessly helped corporations, and/or very wealthy individuals, in addition to the break from onerous property taxes.

        I'd love to hear really knowledgeable discussion.

        It's here they got the range/ and the machinery for change/ and it's here they got the spiritual thirst. --Leonard Cohen

        by karmsy on Sat Sep 08, 2012 at 03:15:26 PM PDT

        [ Parent ]

      •  i lived in Berkeley for awhile ('02-'05) (4+ / 0-)

        and met folks who'd purchased homes in berkeley hills in the '70's & '80's who simply would not have been able to keep their homes on their income had the property taxes followed the housing market.

        one of the places i rented a room in i was able to afford because the owner  paid low taxes.  inherited from her parents in the '70's and probably a million dollar home in the '03 market (my view was from downtown oakland to the richmond bridge), she would not have been able to keep it had the property taxes kept up with the market price.

        having said that, there's certainly room for tweaking Prop 13. my understanding is large corporate entities have gotten around it by doing land transfers and other legal twists.  and i vaguely remember news of one of the large office buildings in downtown SF being sold in 04(?) but property taxes barely changing.

        jesus is coming, buddha here now

        by bnasley on Sat Sep 08, 2012 at 07:12:24 PM PDT

        [ Parent ]

        •  I have no doubt of the sincerity of your comment (2+ / 0-)
          Recommended by:
          bnasley, lonespark

          but it overlooks how economic systems work.  The run up in  CA property is largely because of the low property taxes.  A higher property tax on land keeps the cost of land lower.  It is one of the great ironies that many small property owners think that they benefit from prop 13 because with super high property values an increase in taxes would look frightening.  But with higher property taxes (on land) the artificial high price of land would come way down.  The real winners from prop 13 are the big land owners.

          I live in TX, which has a high real property tax but note that we had almost no housing bubble and very little of the fallout like the states that have capped property taxes.  Our tax system has other huge inequities such as the large property tax give-aways to the ag, timber, and oil industries.  

          The Long War is not on Iraq, Afghanistan, or Iran. It is on the American people.

          by Geonomist on Sun Sep 09, 2012 at 10:38:12 AM PDT

          [ Parent ]

      •  I know people who were in the middle (2+ / 0-)
        Recommended by:
        CupofJoe, lonespark

        of the prop 13 fight and they all say that the myth of people being "thrown out of their homes" was completely manufactured.  In fact, there is not one recorded incidence of this actually happening because of taxes.  It is one of the first modern well-executed big lies of the right.

        There was extremely uneven administration of the property tax, which caused considerable legitimate grievance but is a problem easily correctable.  

        The real movers and shakers behind prop 13 were the big property owners in the state who are still laughing all the way to the bank.  

        And BTW, would people please quit attacking property taxes.  the claim that it is "regressive" really doesn't hold up to scrutiny.  The property tax on land is one of the best and fairest taxes we could have.  The tax on buildings and houses IS a bad tax.  The best progressive solution would be to convert the property tax to a land only tax at high rates.

        The Long War is not on Iraq, Afghanistan, or Iran. It is on the American people.

        by Geonomist on Sun Sep 09, 2012 at 10:26:39 AM PDT

        [ Parent ]

    •  It's time to introduce some numbers (4+ / 0-)
      Recommended by:
      karmsy, Zornorph, Lujane, Sparhawk

      and whittle down the diary.

      California’s chronic deficits aren’t the fault of out of control spending, as conservatives would have you believe. Quite the contrary, it’s inefficient and poorly planned taxation that produces frequent fiscal crises
      http://taxfoundation.org/...

      Of all the states in the union, California has the 6th highest tax burden,  which accounts for both state and local taxes.

      California has a 9.3 percent marginal tax rate, a 9 percent sales tax, and property taxes are still high because even though 1 percent may not seem high too you,  the property values in California are so high that 1 percent is still a lot.

      Seeing that 44 states in the Union have lower tax rates and a less fiscal problems, the problem isn't we have low taxes.

      A good point that the diarist made is that income and capital gains taxes are more volatile. That's why  during boom years the government of the state of California shouldn't spend all the money it gets, but put it in an emergency fund so it can be dipped in to when we have recessions.
      In the late 90's when the  economy of the California was booming, Gray Davis jacked up spending instead of saving the money in a prudent way. The Terminator did the same thing in 2003-2007. so it's bipartisan idiocy.

      California doesn't need out of state agitators telling us what our tax rates should be.  There's a reason why our current Democratic governor said he will not raise taxes without voter assent.
      The people decide, not the politicians.

      •  I don't buy all this (16+ / 0-)

        First of all California has progressive taxes, they max out at 9%, but not all tax payers pay that much.  Most don't even at their highest marginal rate.

        Localities have different sales tax rates and from my experience most are in the 7% range.  Some few are higher and almost none are at 9%

        Californians pay a higher per capita amount, but things are expensive here in California.  You can't run a government here as if you live in the Midwest.

        Schools are vastly underfunded.  We have one of the lowest expenditures per pupil in the country.  47th in the country.

        There is probably way too much devoted to prisons, but that is a function of the huge number of prisoners we have.  and the ungodly sentences handed out.  

        The problem with Prop 13 and the other Jarvis laws is that people do not decide on their taxes.  At least not by majority vote.  Here you have to have a super majority and that means that about 1/3 of the voting people in this state can stop any attempt to fix the problems of underfunded schools.  The same is true in the legislature.  1/3 of the legislatures can stymie the other 2/3.  It happens all the time.

        I think this is a much more mixed bag that you set out here freedomalliance.

        •  Exactly. It is absurd to compare California to (6+ / 0-)

          Oklahoma. We have an entirely different set of requirements and tax structures, as a result of being a vastly larger state.

        •  Yawn (1+ / 0-)
          Recommended by:
          Sparhawk

          You didn't actually read the link

          Californians pay a higher per capita amount, but things are expensive here in California.  You can't run a government here as if you live in the Midwest.
          The tax burden was ranked as a percentage of income, not per capita, so that already incorporates the cost of living.

          "Most don't even at their highest marginal rate."

          The 9.3 percent rate in California starts at $50,000 for single folks and $100,000 for couples. That's a pretty steep rate and  for a low amount of income.
          In Hawaii, the 9 percent rate starts at 150k for singles

          In San Fran and LA County, the sales tax rate is 8.75 percent.

          Again, the proof is in the pudding, even with our supposed low "tax rates" California is 6th in taxes.

          And you are incorrect on taxes. 51 percent of people can increase taxes on a statewide level, and you can also eliminate the 2/3 rule for localities and the legislature with a vote of the state
          It has been soundly rejected by the people.

          •  6th in taxes according to the right-wing Tax (5+ / 0-)

            Foundation, which doesn't include the huge amount of revenues lost due to Prop 13.

            The proof is in the pudding -- California lacks the revenue to run a functioning state, ranked 47th in education spending per pupil.

          •  It takes 2/3 to increase a local (4+ / 0-)
            Recommended by:
            CupofJoe, LillithMc, lonespark, laurak

            property tax to support a local school district, fire department, library, etc. Income, sales, and hotel bed taxes can be increased by 51%. These measures fail with support of 60%, 63%, and 65% of the voters every year.

            The playing field is tilted in favor of people & corporations that own real estate, and against wage-earners and consumers.

            Decisions made by a "vote of the people" are good in theory, but the state's initiative system allows millionaires to easily buy enough signatures to put competing/confusing initiatives on the ballot, and then flood the airwaves with enough bushlit to prevent passage.

            Imagine if the shoe were on the other foot. What if Californians could increase a property tax with 51%, but it took 67% to increase a sales tax?

            The property owners would be screaming to give that taxing power back to the legislature.

            Have you noticed?
            Politicians who promise LESS government
            only deliver BAD government.

            by jjohnjj on Sun Sep 09, 2012 at 08:35:00 AM PDT

            [ Parent ]

        •  nailed it with (9+ / 0-)
          There is probably way too much devoted to prisons, but that is a function of the huge number of prisoners we have.  and the ungodly sentences handed out.  
          well. part of "it", anyway.  CA's prison/'justice' system is a nightmare.

          jesus is coming, buddha here now

          by bnasley on Sat Sep 08, 2012 at 07:14:56 PM PDT

          [ Parent ]

        •  The income tax is barely graduated... (4+ / 0-)

          I would say it's barely even progressive because the higher rates are phased in so fast.  A lot of people in CA end up paying the full amount of income tax, not just doctors and lawyers, but even some less distinguished jobs like secretaries and teachers.  

          I'm fine with raising the top rate, but you need to phase it in more gradually.  Go ahead and tax someone making over a million per year at 18% rate, and someone making more than 500K at 14%, but the 9% rate shouldn't even kick in until around $100K.  

      •  Ridiculous (1+ / 0-)
        Recommended by:
        Lujane

        My sales tax in Lake County is at 7.25% Freedom isn't free, you know.

        "Societies strain harder and harder to sustain the decadent opulence of the ruling class, even as it destroys the foundations of productivity and wealth." — Chris Hedges

        by Crider on Sat Sep 08, 2012 at 06:14:07 PM PDT

        [ Parent ]

      •  Read the diary. I address the Tax Foundation. The (9+ / 0-)

        property tax data is highly misleading, as reappraisals are banned.

        By the way, the Tax Foundation is a product of the conservative antitax revolution. And I am not an "out-of-state agitator," I am from the region with the highest property taxes in the state (Marin County).

        •  Who cares (2+ / 0-)
          Recommended by:
          freedomalliance, lonespark

          It provides correct data, does it not? Do you have a more accurate source somewhere we should be looking at?

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Sun Sep 09, 2012 at 12:58:16 AM PDT

          [ Parent ]

          •  No, it doesn't provide the correct data. Not evenc (1+ / 0-)
            Recommended by:
            lonespark

            close.

            •  Where is it incorrect? (0+ / 0-)

              And what's your proof?

              •  You inherently can't measure what our property (0+ / 0-)

                taxes should be without reappraisals. So we really cannot know how much revenue we aren't collecting.

                What the Tax Foundation does is talk about per capita property tax collection. Which is all well and good, but they rank California in the middle of the pack in terms of property tax collection. That's absurd. California has the highest property values in the country. It shouldn't be ranked in the middle, it should be on top. Property tax is progressive-- and can be made more so.

                Right now it's terribly regressive, as normal Californians are forced to shoulder higher income and sales taxes to cover the lost revenue.

                •  What the link measured is (0+ / 0-)

                  the total amount of revenue that  the state of California and all local counties collect in taxes regardless of source. And then  it divided that revenue by the income that the state produces annually.

                  What the property tax base is irrelevant, since all the link is talking about is the total revenue collected by the state of California and it's subsidiaries.

                  And one again, California is #6 when it comes to taxes. The people of California don't want their taxes to go up.
                  Conservation over, since you didn't take the time to read anything I wrote or linked to.

      •  Oil depletion tax (1+ / 0-)
        Recommended by:
        lonespark

        California is the only place in the world without an oil depletion tax.  There are generous tax breaks for corporations.  The people of CA pay taxes.  The state has received a "D" for management for the past 50 years.

        •  States/countries (0+ / 0-)

          with oil depletion taxes tend to be those  that are net exporters of oil which makes sense.

          So when Alaska has oil depletion taxes, they're effectively raising revenue from everyone else.

          California is a net importer of oil, so an oil depletion tax would basically just raise the cost of gas for it's own citizens, which most Californians won't find fun since California already has the second highest gas tax and one of the highest sales taxes in the country.

          The people rejected an oil depletion tax in 2006. Look it up.

    •  low taxes is racism? (2+ / 0-)
      Recommended by:
      Zornorph, Utahrd

      wtf does this mean

      "o drown out the anti-tax bigots"

      sounds bizarre

    •  Prop 13 and corporations (12+ / 0-)

      Prop 13 fixes property taxes based on the assessment at the time of a sale. So, when I buy a house, the annual property taxes are based on my purchase price. Corporations have used all sorts of legal (and not so legal) ways of preventing re-assessment of property values in ways that I cannot begin to explain or understand in full (there's a blog dedicated to closing the Prop 13 loopholes for corporations), but basically using So, corporations are avoiding tax payments that they should be paying and the rest of us struggle to keep our communities going. A quote:

      But corporations with no overriding desire to shell out millions in taxes do have options — and access to sharp legal minds. The definition of what constitutes a change of control of corporate property allows for remarkable leeway in avoiding a reassessment, shrinking needy cities' tax hauls by billions. Assessors awaiting deeds as a result of mergers, acquisitions, and other corporate transactions may wait forever.

      “Parties do not lead revolutions. They follow them. And then only when forced to.” Joe Bageant

      by tgypsy on Sat Sep 08, 2012 at 06:34:02 PM PDT

      [ Parent ]

  •  Fix Prop 13 (21+ / 0-)

    I've long thought that a far better alternative to Prop 13 would be a modified homestead exemption for property taxes. Under this plan, the property taxes for a California resident's primary residence would be capped at a percentage of her or his income.

    That way, retirees and others who own their homes outright but whose income is fixed or declining, wouldn't have to sell their homes because they couldn't afford their property tax. The property tax would decline along with their income.

    But under this system, we wouldn't be giving tax breaks to wealthier taxpayers who own multiple homes, or to out-of-state residents.

    The system would do better than the current Prop 13 in protecting retirees because their tax benefit would go to them, instead of to their house. Right now, longtime California homeowners enjoy ultra-low property taxes only so long as they don't move. When you sell and buy a new home, you start paying property taxes at the full sale price of your new home, which will be much higher than the depressed "fictional" price of your old one. That keeps many retirees living in too-large family homes for years, keeping those homes off the market and inflating home prices for young families.

    Under the system I described, retirees could sell their old family home to a young family that needs the extra space, then move into a small property, and their property taxes wouldn't rise above that fixed percentage of their income. It's a win-win for everyone, except for wealthy Californians and out-of-state homeowners such as Warren Buffett, who are paying the nation's lowest property taxes while California children endure year after year of school budget cuts.

    And I don't give a damn about them.

    •  This is a great, knowledgeable comment. (4+ / 0-)

      You are for sure on the right track, in that you acknowledge the reason why Prop 13 was passed in the first place: high property taxes. But you propose a more reasonable, measured solution than what we in fact ended up with.

      Now, how are you going to "sell" this idea--and what are you going to learn from criticisms of its drawbacks?

      It's here they got the range/ and the machinery for change/ and it's here they got the spiritual thirst. --Leonard Cohen

      by karmsy on Sat Sep 08, 2012 at 03:39:37 PM PDT

      [ Parent ]

    •  Robert - while this is an excellent idea (6+ / 0-)

      Prop 13 is wildly popular with voters. I do think we have a chance to exclude commercial real estate from Prop 13 property tax limits  if it is done gradually over a ten or twenty year period.

      "let's talk about that"

      by VClib on Sat Sep 08, 2012 at 03:44:13 PM PDT

      [ Parent ]

    •  what you described (2+ / 0-)
      Recommended by:
      Lujane, lonespark

      isn't a homestead exemption, homestead exemption excludes x amount of the assessed value from your property from property taxes, that's it.

      Proposition 13 isn't just about retirees. Middle class families shouldn't be priced out of their homes because of the price of a home goes up. Property taxes are regressive.
      And you're incorrect about retirees staying in big houses. Most counties allow people over 65 to sell and keep their lower assessed tax rates.

      You don't know jack about california property tax rules.

      http://www.boe.ca.gov/...

      Propositions 60 and 90 allow senior citizens to transfer the adjusted base year value from their current home to a replacement dwelling. Certain requirements must be met.

      In general, if you or your spouse is age 55 or older, you or your spouse may buy or construct a new home of equal or lesser value than your existing home and transfer the adjusted base year value of your existing home to your new home if certain requirements are met. This is a one-time-only benefit. Thus, once you have filed and received this tax relief, neither you nor your spouse (if your spouse is a record owner of the replacement dwelling) can ever be granted this benefit again. The only exception is if you or your spouse becomes disabled after receiving this tax relief for age. If this happens, you or your spouse may transfer the base year value a second time based upon the disability. The relief for disability involves a different claim form.

      Reference: Section 2(a) of Article XIII A of the California Constitution and section 69.5 of the Revenue and Taxation Code.

      These are things people learn in the real world

    •  At least you're thinking.... (1+ / 0-)
      Recommended by:
      lonespark

      but I don't agree with this solution....I think the rate should stay the same or in other words...Prop 13 should apply only to residents at their primary home....everything else a new tax system should apply...

    •  Sane tax reform (2+ / 0-)
      Recommended by:
      lonespark, CupofJoe

      Other states did reasonable tax reform in the late 1970's like giving senior citizens a break.  Limiting the amount of increase for residential properties in a year.  They did not throw out their basic system using the assessors office and basic property values that can go up and down or add the commercial property con or the 2/3rd obstruction rule for new taxes.  Their reforms were done by their legislature.  When CA uses the proposition system they alter the state Constitution making it almost impossible to change the new law although anyone anywhere in the world with enough money to buy votes can use it.

  •  How can one take seriously an analysis of (8+ / 0-)

    California's fiscal situation wherein the subject of unfunded city and state pension liabilities isn't even mentioned?

  •  I was reading from people whose (0+ / 0-)

    property taxes were too high and couldn't afford to paid ever increasing taxes.

    Independents are republicans who're squeamish about genocide.

    by sujigu on Sat Sep 08, 2012 at 06:59:15 PM PDT

  •  What are the polls on this? (2+ / 0-)
    Recommended by:
    LillithMc, lonespark

    I can't believe any tax increase is going to get voter support.  I'm still bitter that we couldn't even support a modest vehicle license fee to pay for state parks.  The post-secondary education situation is a disgrace.  I'm a little depressed about my state right now.

  •  taxes 'n stuff (1+ / 0-)
    Recommended by:
    lonespark

    The number of homeowners benefiting from Prop 13 is dwindling fast.  The problem is the corporations who will benefit from it in perpetuity.  

    There are some other issues:  the large "underground" economy, the lack of an oil production tax, and corporate taxes.  Under Gov Reagan, corps contributed about 28% of state revenue, that is now around 13%.

    The underground economy is a big problem, with almost 50% of the population either not required to, or avoiding, paying state income taxes.    

  •  Corporations? (1+ / 0-)
    Recommended by:
    Sparhawk

    Some of California's highest unemployment is in the Inland Empire (Riverside & San Bernardino).

    If corporate property taxes there go up too far; many of the distribution and logistics businesses there can move to Arizona or Nevada.  Unemployment is even higher there.  Corporations could pay less tax and lower wages.

  •  Not convinced repealing Prop 13 would be a pancea (3+ / 0-)
    Recommended by:
    jfinsocal, Sparhawk, lonespark

    A lot of the theoretical numbers thrown out over the repeal of Prop 13 assume that current housing prices would remain the same.  I would suggest that if it were not for Prop 13, housing costs in California would be very much lower.  All of the elderly home owners holding on to their place due to low property tax will all of a sudden have a huge incentive to sell.  Property values across the board would drop, and revenue would not go up as much as proponents of repeal would like to believe.  

    There are some definite problems with Prop 13, but I'm not convinced that throwing it out altogether is the way to go.  

    •  That incentive works both ways, though. (1+ / 0-)
      Recommended by:
      lonespark

      I support a repeal of Prop 13, but bear in mind, what you call "a huge incentive to sell" looks to a lot of folks an awful lot like "the tax hike will make me sell my house".

      Conservatives need to realize that their Silent Moral Majority is neither silent, nor moral, nor a majority.

      by nominalize on Sun Sep 09, 2012 at 05:45:03 AM PDT

      [ Parent ]

    •  split roll (2+ / 0-)
      Recommended by:
      lonespark, LillithMc

      The proposal for modifying pop 13 that I think would work is one that separates property taxes for corporations out from property taxes for individual homeowners. If phased in gradually, a split roll tax would allow the balance of revenue to shift back to where it was when 13 was implemented, with corporations paid proportionally more.

      Imagine how much more Disney would need to pay in Anaheim...

  •  Interesting diary but it misses a bit... (3+ / 0-)
    Recommended by:
    Ms Citizen, CupofJoe, lonespark

    The only thing wrong with Prop 13 is that it applies to all real estate holding and not just primary residences...and that's all it really should apply too.

    People who own commercial properties, have transfered the properties to various trusts, LLC's and Corps, especially ones with significant value and prime placement in the market...so when the property is sold they just transfer ownership of the entity instead of the property which allows them to maintain tax rates from 30 years ago...

    In order to be fair especially in regards to Apartment owners in order to eliminate Prop 13 for Commercial Properties you'd also have to eliminate any form of rent control in specific markets...or landlords would lose their investments...so the chances of it being eliminated/reworked are slim.

    California with just eliminating Prop 13 on commercial and non-primary residences could increase tax revenue by 2 billion a year minimum....

    Some people above have mention that pension obligations are going to break California....pension obligations aren't really the peoblem here...mismanagement and corruption are...Californians are taxed enough.

    Prop 13 is also about preserving wealth...eliminating Prop 13 would let the winds out of the sales of a lot of bloated real estate prices....

    Another thing it would do is clean up a lot of dilapidated / under-performing properties....

    The chances of it being reworked, depends on how well opponents can counter the "you're tossing Grandma on the streets" rhetoric...that's an uphill push....

  •  Re (0+ / 0-)

    Population of California is 37.6 million.
    Population of Texas is 25.7 million.

    California created 365k jobs, or about 1 job per 103 residents (roughly).

    Texas created 222k jobs, or about 1 job per 115 residents.

    California's rate of job creation was around 13% better than Texas, not (as seems to be implied here) well over 50% better.

    You can't use the raw number because it is skewed by population. Otherwise, say, RI could have zero unemployment, but their economy must suck because it only created 100k jobs or whatever. Clearly that is not the case.

    (-5.50,-6.67): Left Libertarian
    Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

    by Sparhawk on Sun Sep 09, 2012 at 12:55:07 AM PDT

  •  As a homeowner and a progressive, (2+ / 0-)
    Recommended by:
    lonespark, freedomalliance

    I do not like property taxes. When my income plummeted at the beginning of the Great Recession, my property taxes stayed the same. I have no other investments. I live in a high priced (some say overpriced) real estate market (San Francisco) with high mortgages, and keeping my home was and continues to be a struggle.

    Property taxes in some sense are regressive. They do not go up and down with income, and selling your home in response to loss of income is not necessarily an easy or prudent decision.

    Just because your house has a high value does not mean you own any of that value, and it does not make you rich. I personally am slightly underwater on my home's value, so my net worth is roughly equal to zero, and I essentially pay my bank and the government for privilege of living somewhere nice.

    My decision to stay and continue making high interest payments and high property tax payments were to avoid having to face the San Francisco rental market, where people line up in groups of 50 for a chance to rent a $2000/month studio above a massage parlor. No thanks. My third choice was to leave, which is unthinkable given that my life and my career have been here for almost two decades.

    I would be happy to pay a much higher rate of income tax, so my tax level can respond to how much money I'm able to earn in a year. I would also be happy to a much higher tax rate on liquid investments like stocks and bonds, when I can eventually afford those again. Anything but property taxes, even if it costs me more in good times. One of the features of progressive taxation is that it fairly reflects your wealth and earning capacity. But property taxes in a recession on underwater homes fails that test.

    So as much as I dislike Prop 13 for screwing up our state, progressives: be very careful tinkering with this. Some of its features are very popular, and for good reason, even popular with liberal Democrats. Try and repeal the limits on yearly increases, and you'll have an electoral disaster on your hands.

  •  At a convenience store (1+ / 0-)
    Recommended by:
    lonespark

    in Niagara Falls NY area, a discussion started on taxation.  This huge Californian started asking everyone what their property taxes were.  He claimed (bragged)  he pays $1800.00 per year on a $600,000.00 ocean front house. He then yelled that we (I guess the New Yorkers and I) should get rid of the damn democrats.  He walked out before I could suggest that maybe if he paid more taxes his schools wouldn't be in the toilet.  He probably has already educated his children  (by himself) and has no need for public education.  Where did people become so self centered?

    You can fool "some" of the people all of the time. Abe Lincoln was right.

    by regis on Sun Sep 09, 2012 at 05:43:35 AM PDT

  •  Prop-13 came hard on the heels of a huge (2+ / 0-)
    Recommended by:
    CupofJoe, lonespark

    school busing fight in Los Angeles County.

    We need to remember that the civil rights era didn't end with the federal legislation signed in 1964 & 65. It took another decade of lawsuits, appeals, and court decisions to desegregate jobs, housing and schools.

    By 1977, the struggle reached fever-pitch in SoCal, and the Jarvis Jihadis were able to exploit white resentment toward "big government". Combined with inflation and rampant speculation in the real estate markets, the conditions were perfect for Prop-13.

    Have you noticed?
    Politicians who promise LESS government
    only deliver BAD government.

    by jjohnjj on Sun Sep 09, 2012 at 08:59:11 AM PDT

  •  Also succeeding "despite" environmental regulation (2+ / 0-)
    Recommended by:
    lonespark, CupofJoe

    Worth pointing out.

  •  Another Prop. 13 problem (2+ / 0-)
    Recommended by:
    lonespark, bruddaone

    My son needed to reduce his mortgage payments.  Even if he had received a mortgage modification, his taxes are locked into 1% of his purchase price.  In his case his taxes were $5000 per year.  The bank short-saled his home for $300,000.  The new owner pays $3000 per year.  No way to get my son's taxes adjusted downward with Prop. 13.  BUT in a state where taxes are assessed by property values, they could be assessed downward.  It was not hard to give residential property owners tax relief as happened in many states.  It was the Republican/Corporation/Tea Party crowd that did Prop. 13.  Yes the sheeple love it, but they are not very smart.  Also the Proposition system does an end run around legislators giving them an excuse to not do their job responsibly.

    •  I don't know where you are in California... (1+ / 0-)
      Recommended by:
      freedomalliance

      But in Los Angeles County you can get your taxes adjusted downward if the value is not there...the tax assesor has a special form for it...all it takes is three comps from your local realtor....

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