Yes, There’s Life After Prop. 13

Now that the fate of Proposition 13 has passed into the uncertain hands of the U.S. Supreme Court, I decided to play handicapper and call some of our leaders, asking them to predict the outcome. Give me the odds, I said, on Proposition 13 being struck down and California thrown into pandemonium.

Guess what. Few, if any, wanted to play my game, at least in public. The reason is simple: Proposition 13 has acquired such potency as a symbol of voter rage that no political leader wants to be seen predicting its demise, even at the hands of another branch of government.

In truth, this decision by the Supreme Court is hard to predict for anyone. Let’s give the insurgents a 50-50 chance, at best. Not the kind of odds you would bet the house on. But still, enough to make you wonder about the nature of a post-13 world.

And guess what again. Many models for a post-13 world already have been constructed. Some flow from the good government types and will go nowhere. One such plan proposes that California ditch the property tax altogether, shifting the burden to the income tax. Dream on, goo-goos.

My estimable colleague from the financial section of this newspaper, Daniel Akst, hustled another model Tuesday, namely a scheme where the state allows property taxes to climb higher but defers collection until the time of sale. In other words, a state-sponsored balloon payment that would be waiting for anyone moving up or out. If that one flies, Dan, you can name your luncheon spot.

As I say, the models proliferate daily, and since it’s the penchant of the pundit to predict, here’s my own bet on how things will turn out should Prop. 13 get sent to initiative heaven:

First, we will witness a wild scramble in the Legislature as our political leaders fly to the defense of the homeowner. In so doing they will demonstrate how much the world has changed since 1978 when many of this same crowd predicted that passage of 13 would mean the end of civilization as we knew it.

In this scramble, the battle cry of the moderate left and moderate right becomes “revenue neutral.” That means any new scheme must produce the same level of revenue--no more, no less--than did the 13 system. The Howard Jarvis crowd joins the moderates in the cry for revenue neutrality, but a small group of legislative Tories maneuvers for a net reduction in revenues and threatens to walk out of negotiations.

With stalemate looming, the governor and Willie Brown hold summit talks. Brown emerges to accuse Wilson of failing to deliver the Tories. Wilson accuses Brown of delaying tactics to make Wilson look less than presidential. Stalemate continues.

The Howard Jarvis Taxpayers Assn. abandons the Legislature and puts its own scheme on the ballot. The initiative allows local districts to assess all houses at full market value and establishes the tax rate at the old Proposition 13 level of 1%.

But the initiative also raises the homeowner exemption to 50% of the assessed value, putting the “real” tax rate at 0.5%. This means a $300,000 house will incur an annual tax liability of $1,500.

Since this system will produce less revenue from homes than did Proposition 13, the Jarvis initiative achieves revenue neutrality by increasing the take from commercial property. Business leaders cry foul, fight initiative, threaten to pack up for Idaho.

Initiative passes, business stays, sky does not fall.

Not all homeowners will love this scenario, of course. The geezer crowd, those who owned their homes prior to 1975, stand to lose the extraordinary tax benefits bestowed by the present system. Under that system a million-dollar home, purchased in 1975 for $65,000, has seen its assessed value increase at only 2% a year while its true value may have increased 1,000%. The owner of that house may be paying one-tenth the tax of his next-door neighbor who bought in 1990.

Of course, that inequity constitutes the reason for the review by the Supreme Court. We should not mourn its passing. In addition to the inherent unfairness, the current system makes prisoners of homeowners who cannot move because a new house means a full-market-value assessment and a doubling or tripling of their tax bill.

Over the years, these inequities have increased rather than diminished. If Proposition 13 is struck down by the courts and anything close to my scenario takes place, we will come out with a system that spreads the same burden more evenly among all those who own property.

There will be winners in the new system and there will be losers, as always, but more of the former than the latter. That’s my bet, at least. Now it’s up to the Supreme Court to get this drama under way.