In California between 1974 and 1978 property taxes increased 120 percent and people worried they might lose their homes. Enter Proposition 13, which amended the state’s constitution to limit the growth of property taxes—appropriately enough, as 35 years ago the state was running a budget surplus. The measure capped property tax rates for residential and commercial properties at 1% of the assessed value and prevented assessed value from growing more than 2% a year.
Governor Jerry Brown called Proposition 13 a fraud and a rip-off but it passed with 65 percent of the vote. Brown then proclaimed himself a born-again tax cutter, which was never true. Prop 13 did not raise state spending or government employees’ pay, mandated no new state hires, and created no new state agencies. But liberals have blamed it for the state’s financial woes. They also charge that Prop 13 shifted the tax burden from businesses to homeowners and have floated measures, such as AB 188 by San Francisco Democrat Tom Ammiano, to change the way property is assessed. Trouble is, Proposition 13 did not shift the tax burden to homeowners.
According to Proposition 13 Revisited, a report from the California Taxpayers Association based on data from the state Board of Equalization, homeowner-occupied property bore 41.84 percent of the overall property tax burden in 1979-70 and 39.74 percent in 2011-12. Commercial property bore 58.16 percent of the burden in 1979-80 and 60.28 percent today. The report concludes that Proposition 13 has brought predictability, stability and objectivity to California’s property tax structure.
Proposition 13 constitutes a limitation on government’s power to tax, which is why liberals hate the measure. But they are unwilling to bring the issue before the people. Jerry Brown is governor again and his Proposition 30 made California the highest-tax state in the nation. The Golden State’s financial problems, meanwhile, are due to excessive government spending, punitive taxes, a hostile business climate, onerous regulation, corruption, and wasteful bureaucracy.