Proposition 13 Did Its Job --Now Sacramento Needs a Boston Tea Party, Too

More than 200 years after colonists revolted at the Boston Tea Party against unfair taxation, ballots replaced bullets in another tax revolt on June 6, 1978.

Ten years ago Californians took their government into their own hands and voted to roll back their property taxes and permanently limit future increases in taxes on property when they overwhelmingly passed Proposition 13.

As a first-time candidate for the California Assembly that year, I was one of the few public figures supporting Proposition 13. The liberal Establishment looked on Proposition 13 with horror and figured to defeat the initiative with scare tactics, as they had defeated previous tax-limitation measures. Gov. Edmund G. Brown Jr. called it a “rip-off” and a “consumer fraud.” And one economic study even said that it would cost the state 450,000 jobs (just the opposite, of course, of what actually happened).

Remember the circumstances that gave rise to Proposition 13. In the mid-1970s housing prices in California were increasing many times faster than the surging national inflation rate, and property taxes were skyrocketing as a result. For example, the taxes on my father’s home rose to exceed his mortgage payments. Without Proposition 13 my father would have lost the family home over tax increases.

The voters, furious about their mounting taxes and the failure of the Legislature to act, didn’t believe the harum-scarum campaign against Proposition 13, and voted themselves a whopping tax break. The results for taxpayers have been spectacular. Property taxes were cut by more than 50%, and future increases are severely limited. Proposition 13 has saved the taxpayers more than $90 billion since 1978. It also ignited a remarkable expansion in California’s economy that produced hundreds of thousands of new jobs and insulated California from the economic downturn that plagued most of the rest of the nation a few years later.

The Legislature, chastened by the 2-to-1 vote for Proposition 13, quickly indexed the state income tax to the inflation rate, saving taxpayers $23 billion more. California’s tax revolt reversed the steady increase in state taxes as a percentage of personal income, which had grown from 11.3% in 1960 to 15.4% by 1978. These measures returned the state tax burden to 11.8%, where it has remained. California dropped from being one of the highest taxing states to about the middle of the 50 states.

The effect of Proposition 13 spread the tax revolt to other states and at least 10 other countries. With Ronald Reagan’s election, the tax revolt swept through Washington, resulting in the 1981 Kemp-Roth tax cuts, sparking the longest sustained peacetime economic expansion in our nation’s history.

And what of the predictions of calamity for government in California? Well, the sky never fell. What Proposition 13 did was force city and county governments to become much more efficient. Local spending for public safety and health, adjusted for inflation, has continued to rise; spending for general government administration has fallen.

But, unfortunately, state government hasn’t been similarly streamlined. While Proposition 13 did cut property taxes that are collected by local governments, it did not cut state taxes at all. In fact, the state budget, which was $14 billion when Proposition 13 passed, has grown to more than $44 billion today.

The reason we don’t have enough money for new road construction and school classroom construction is not a shortage of funds; it’s because our state government has become very expensive and has altered its traditional budgetary goals.

State government 25 years ago spent nearly 16% of the budget on transportation. Today we spend less than 6% and rank last in the nation in transportation spending per capita. Education has received massive funding increases under Gov. George Deukmejian. Spending per student, adjusted for inflation, has risen by 20% since Proposition 13. Unfortunately, we are still allocating too much money to an unwieldly bureaucracy.

The reason that state government is still out of control is simple; despite the fact that several of us won elections supporting Proposition 13, gerrymandered legislative districts protected most of the liberal incumbents in “safe” districts, insulating them from California voters’ desire to cut taxes. Until the big spenders are out, the state’s bureaucracy will continue to grow.

But just think how much faster government spending would have risen without Proposition 13, the Gann spending limit and income-tax indexing. Imagine what would have happened to California’s economy if government had taken another $150 billion out of the private sector. The bottom line is that Californians are much better off for having voted for Proposition 13 in 1978, when we held a West Coast version of the Boston Tea Party.