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Proposition 13 isn't the problem

When times get tough, the property tax measure comes under attack, but it's no boogeyman.

July 09, 2009|Joel Fox | Joel Fox, president of the Small Business Action Committee and co-founder and editor of foxandhoundsdaily.com, was president of the Howard Jarvis Taxpayers Assn. from 1986 to 1998.

The "Blame 13" chorus is at it again. You can always count on it to sing "It's all Proposition 13's fault" during difficult economic times. The story has gone national, with columns in Time magazine and the New York Times taking shots at Proposition 13. The attacks are probably best summed up by an editorial cartoon picturing Proposition 13 as the beginning of the end for California civilization.

Let's get the facts straight. Despite the cap instituted by Proposition 13, property taxes have increased dramatically in California. According to Board of Equalization data, property tax revenue has increased 800% since the measure passed in 1978 -- from $5.6 billion a year to $50 billion. Compare that with general fund revenue -- made up largely of sales, income and corporate taxes -- which has increased 500% over the same period.

Attempts to change Proposition 13 tend to focus on two approaches. One is to divide residential property and commercial property and tax them on a different basis, using either a different tax rate or a different assessment schedule. Such a procedure is called a "split roll" because the property roll is split into different categories.

The other approach is to reduce the requirement to pass a state tax from the two-thirds legislative vote established by Proposition 13 to a lesser percentage. (Proposition 13 is often mistakenly charged with the requirement of a two-thirds vote in the Legislature to pass the state budget. Not true. That requirement took root during the Depression.)

The split-roll proposal is self-defeating for an economy trying to dig itself out of a hole, and implementing it would cost jobs. Former state legislative analyst William Hamm co-wrote a study last year that claimed a 1% increase in business property tax rates would lead to 43,000 jobs lost. With double-digit unemployment, that is something California can ill afford.

Of course, businesses, where they can, will pass tax increases on to consumers through higher prices, to tenants through raised rents or to employees through lower wages. Passing through the tax is an important notion to understand, especially for those who rally around a split-roll proposal in hopes of sticking a tax to big business. But it's small businesses that would be hurt the most. Many live on close margins, and a tax increase would be a considerable burden.

Further, business property owners do not enjoy a break over homeowners under Proposition 13, as some have charged. The Hamm study, using Board of Equalization data, found that owner-occupied residential property is assessed at 53% of the current market value; at 60%, commercial/industrial property is assessed closer to the higher current market value.

Voters have shown that they appreciate the protection a two-thirds legislative vote on taxes provides. Five years ago, a measure to lower the two-thirds threshold for taxes and the budget to 55% was crushed 2 to 1 at the polls.

Legislators centralized some power in Sacramento after Proposition 13, in great part because of state Supreme Court decisions on how schools are funded. There is talk that some power should be shifted back to local government and that the legislation must be undone or taxes raised to accomplish this goal. Keeping government decisions closer to the people is a good idea. But Proposition 13 does not have to be dismantled in the process.

Supporters of increased state spending have spent 31 years trying to make Proposition 13 the boogeyman. The measure has been held responsible for a freeway collapse during an earthquake and even for O.J. Simpson's not-guilty verdict in the 1995 criminal trial, to name a couple of examples.

But for a great majority of Californians, the boogeyman label doesn't stick. The measure passed 2 to 1 in 1978, and polls indicate 2-to-1 support today. Who do you trust, the politicians who want to change or repeal Proposition 13, or Proposition 13 itself? For the voters of California, the answer has never been clearer.

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