Voters Rose Up in 1978, and May Do So Again : ‘Deflator’ Version of Proposition 13 Could Make It Onto the Ballot in 1990

“Property values are increasing, as everybody knows. My wife and I are both disabled. . . .”

“My elderly parents cannot afford to move, and my parents are not the only ones in this situation. . . .”

Such desperate words can still be read in old letters in the files of tax crusader Paul Gann’s modest office in Sacramento.

Almost 10 years ago, the writers of those letters and 4.28 million other Californians rose in bipartisan revolution against their state government.

They were frightened people.

They had been caught in inflation that spread like wildfire in the mid-1970s after the Organization of Petroleum Exporting Countries cut back oil production to force up prices.

Few homeowners understood the learned jargon of economists explaining what had happened. They didn’t need it. The tax bills they were getting from their county assessors said everything.

In a state where cities, counties and schools leaned heavily on property taxes, the price of houses was rising alarmingly. So were the taxes on them. For retired people and others on fixed incomes, it was a nightmare.

Swarm to Polls

On June 6, 1978, they swarmed to the polls and passed Proposition 13, an initiative that amended the California Constitution to drastically cut back and limit property taxes.

They did it against the advice of their governor and most of the legislators they had chosen to represent them. Instead they turned to two elderly mavericks on the fringes of California politics. Party affiliation meant nothing. As many Democrats may have voted for Proposition 13 as Republicans.

The impact was nationwide. It turned Gann and his political partner of the time, the late Howard Jarvis, into national figures. It frightened politicians everywhere, and led to property tax restrictions in other states.

The end is not in sight.

A new version of Proposition 13 may well confront Californians when they vote in 1990.

The Jarvis-Gann initiative rolled assessments on homes and other property back to the levels set in the 1975-76 fiscal year. It forbade assessments to be raised more than 2% a year. It also limited property taxes to no more than 1% of assessed valuation.

However, Proposition 13 allows dwellings, and other real estate, to be revalued at current prices every time the property changes hands. As a result, people who buy homes at today’s prices often pay drastically higher property taxes than their neighbors who have stayed put since 1978.

‘Deflator’ Proposal Advanced

In the Legislature, Assemblyman Ross Johnson (R-Fullerton) is carrying a proposal to amend the Constitution to roll all property tax assessments back to 1975-76 levels. Even for houses built after Proposition 13, valuations would be cut back to assumed 1975-76 rates by use of a “deflator” formula.

“We have statistics indicating that more than half the people in California have moved since 1978,” says Susie Swatt, a member of Johnson’s staff. “People who have moved have not received all the benefits.”

Johnson’s proposed constitutional amendment gets its first committee hearing this month. If the Legislature doesn’t act, Johnson’s idea may be turned into a voter initiative by the California Tax Reduction Movement, the organization Jarvis left behind when he died in 1986.

“I wouldn’t rule it out if we have no success with the amendment Mr. Johnson has offered,” says Joel Fox, the organization’s current president. “I’ve been hearing concern about the inequities for the last couple of years. It’s going up by a couple of decibels every year. I’ve seen polls where people say by 2 to 1 they don’t like it (unequal taxes).”

“California Tax Reduction Movement already has sounded us out about cooperation,” says Ted Costa, chief of staff for the Gann organization. “We haven’t made a decision.”

Gann Voices Regrets

But Gann himself has said his “one regret” in pushing through Proposition 13 was its unequal tax treatment for those who change homes.

Assembly Speaker Willie Brown (D-San Francisco) and Senate President Pro Tem David A. Roberti (D-Los Angeles) are well aware of the issue.

“Proposition 13 has not succeeded at anything except for those homeowners who have lived in the same house since before its passage, and intend to die in that house,” Brown says.

“We’re going to have to try to do things about the inequities,” Roberti says. “That’s something that has to be addressed, but it’s going to be very difficult.”

Today one has to grope through old documents to get an inkling of the emotional climate in June, 1978.

The best clues are not the fancy words of editorial writers or politicians, but the thoughts ordinary Californians put down on paper at the time.

Unfortunately for social historians, few such documents survive. The files at the office of Gann’s organization, People’s Advocate, have thousands of letters from ordinary voters, but none written before the election. Boxes of the Gann organization’s documents at the State Library are rich in newspaper clippings, but there are no pre-election letters.

The examples used in this story are taken from “thank you” letters written to Gann after the 1978 election, urging him to do even more.

They are only a faint echo of the tumult of the time.

The Legislature certainly had plenty of warning of what was coming, says Martin Helmke, the veteran state Senate tax consultant.

“The pressure on senators and assemblymen was enormous,” Helmke recalls. “Everybody was getting letters and telephone calls. The expression for it is ‘groundswell.’ For two horrible years we fumbled, and came up with something inadequate. Facing Proposition 13, it went down to dismal defeat.”

‘Time to Get Involved’

“We never had been involved in property taxes at all up until 1976,” Gann said in an interview shortly after the election. “In 1975 and 1976, more and more people were writing us, calling us, and telling us it was hard to live in their homes because of property taxes. . . . We thought it was time we got involved.”

The Gann and Jarvis organizations both circulated separate property tax initiatives in 1976, but didn’t round up enough signatures to qualify them. They agreed to join forces for the 1978 election.

Some legislators saw the tornado coming and tried to head it off. They had to weigh conflicting pressures from lobbyists, plus real concern about the blow a property-tax rollback would deal to local governments and schools.

In the end, they were able to put an alternative measure, known as Proposition 8, on the same June 6, 1978, ballot. It would have provided 30% property tax relief.

It never had a chance. The Legislature’s compromise proposal was complicated. The Jarvis-Gann program in Proposition 13 was easy to understand. And it provided an average tax cut of 57%

If Jarvis and Gann needed any help, they got plenty of it in the first half of 1978 when county tax assessors mailed out notices of property revaluations.

In Sacramento County alone, 65,000 property owners learned that valuations of their homes and other real estate were being raised by 40% to 50%.

“It would be large under normal circumstances,” said William Lynch, the county assessor at the time. “But for the last three or four years, no. Inflation, supply and demand are pushing the values of property in California at a very rapid rate.”

In San Mateo and Orange counties, the market values of single family homes--and their potential tax liability--were reported rising at a rate of 3% a month.

On Election Day, 68.9% of the state’s 9.93 million registered voters cast ballots--a turnout never equaled since in a primary election in California. Proposition 13 got a 64.8% majority--with 4.28 million “yes” votes and 2.33 million voting “no.”

Almost 1 million people who voted on Proposition 13 didn’t even bother to vote in the primary election for governor, in which incumbent Edmund G. Brown Jr. won the Democratic nomination and Evelle Younger became the Republican standard bearer.

Proposition 8 Loses

The Legislature’s tax cut proposal, Proposition 8, lost by 47% to 53%.

Public opinion polls before the election reported accurately that the Jarvis-Gann measure was ahead. But they also failed to gage the vast lode of voter resentment that Gann and Jarvis had discovered.

Mervin Field’s California Poll showed Proposition 13 ahead by only 42% to 39% in early May. A straw vote taken about the same time by Public Opinion Associates of San Francisco also had Proposition 13 ahead by a relatively slim 42% to 36%.

Nationally read newspaper pundits, especially liberals, were shocked by California’s taxpayer uprising against the near-unanimous opposition of the political establishment.

“Popular mistrust of public officials has given license to middle-class greed,” wrote the late columnist Joseph Kraft.

San Francisco Chronicle columnist and former city editor Abe Mellinkoff looked closer to home, and came up with an assessment of why the voters bypassed their state government.

“There are a number of intelligent lawmakers in Sacramento, but they tend to be specialists,” Mellinkoff wrote. “They are very good at passing laws that are of intense concern to a small group, and of no interest to anybody else.

“Controversial issues that have aroused the populace have a difficult time. Many legislators simply get political hives when they are forced to come close to them.”

Heeding the overwhelming passage of Proposition 13, Gov. Brown pronounced himself a “born-again tax cutter.” He and the Legislature enacted a flurry of state tax cuts, wiping out the business inventory tax, phasing out the inheritance tax and adjusting income tax brackets for inflation.

As of the 1985-86 fiscal year, state budget experts calculated the tax changes had saved Californians $106 billion--including nearly $77 billion from Proposition 13 alone. It now is saving taxpayers roughly $15 billion a year.