A face-lift for Prop. 13?
Proposition 13 turns 30 today, which means it’s officially no longer young. In wishing it a happy birthday and ushering it into a healthy middle age, we want it to slim down, get a checkup, consider some cosmetic surgery, hang out with a better crowd and start acting more like a mature, responsible citizen than an unruly teenager.
Property tax paying Californians gave birth to the enfant terrible of all ballot initiatives a generation ago. Real estate values in the state, and especially in Los Angeles, were in one of their dizzying ascents, meaning huge tax bills for homeowners as soon as their property was reassessed. Critics of tax reform scoff at the notion today, but there really were people in the 1970s who could have been taxed out of their homes. As the U.S. Supreme Court later noted in upholding the landmark initiative, citizens have the right to stabilize their neighborhoods by making future taxes predictable.
Voters approved Proposition 13 on June 6, 1978, ending the long-standing practice of basing property taxes on current market value. The initiative capped taxes at 1% of the assessed value as of 1975 or, for those who bought after the measure passed, the same percentage of the purchase price, plus up to 2% a year.
Under this scheme, newcomers with higher property values began subsidizing vital services for the next-door neighbors who had bought early. Sacramento went crazy, back-filling revenues lost to local government and, in the process, undermining city and county self-determination. Schools, municipalities and the state began a giant shell game of shifting, grabbing and releasing funds. Cities discouraged housing and sought sprawling retail developments because they needed the sales tax money. The state’s population grew, and with it the need for water systems, roads, libraries and schools, but the aging portion of the demographic that votes chose to expand the tax revolt in a series of ballot measures that took the property tax cap far beyond what Proposition 13 envisioned.
Today, for seniors, low property taxes are portable to new homes, sometimes in distant counties. Artificially low rates survive a multitude of property transfers. Vacation homes and corporate property get the same protection ostensibly meant to stabilize neighborhoods.
Defenders of the measure and its offshoots have taken to reflexive denunciations of any attempt to discuss Proposition 13 and whether it should be amended to provide fairer taxation for residents, and more rational levels of revenue to pay for the quality of infrastructure and governance that Californians still expect. But birthdays ought to be a time of self-examination. Proposition 13 provides predictability for homeowners, and it ought to be retained. But it may be time for a haircut.