The Democracy Center On-Line
Volume 49 - SEPTEMBER 4, 2003
PROPOSITION 13 AND AMNESIA CALIFORNIA STYLE
Dear Readers:
Well, with blackouts in the east and a political circus in the west, the U.S. these days is starting to seem even more like Bolivia than Bolivia. I do confess, however, that I remain, as is much of the U.S. media, a little obsessed with the wild political goings on in my home state of California.
Recently an important piece of California history has resurfaced in the star-studded election debate - Proposition 13 - that famous citizen's initiative to slash taxes, approved by Californians 25 years ago, setting off three decades worth of anti-tax rebellions. I was a student intern in the State Capitol a quarter century ago when the anti-tax rebellion was born and have been a student of it ever since.
In this newsletter, a little reminder of history, conveniently lost in the current script of state politics.
Jim Shultz
The Democracy Center
PROPOSITION 13 AND AMNESIA CALIFORNIA STYLE
It was, ironically, the zillionaire investor Warren Buffet, who set off the new wave of debate over California's Proposition 13. Freshly re-minted as an economic advisor to Terminator and gubernatorial candidate, Arnold Schwarzenegger, Buffet set off a political firestorm a few weeks ago when he suggested in an interview with the Wall St. Journal that maybe, just maybe, California's super-sized budget crisis might have something to do with the state's 25 year old tax-cutting measure.
In California politics even the merest suggestion that Proposition 13 might need to be reformed sets off the political equivalent of Judgment Day - political bombs launched at the messenger from every direction. Republican rivals quickly charged that this was a revelation that California's latest actor-turned-politician was really a closet tax raiser. Governor Davis used the occasion to pledge Proposition 13 his permanent fidelity and within hours Mr. Schwarzenegger did the same.
Lost, as usual, is the memory of how a ballot revolution aimed at cutting taxes for homeowners also saddled California with an unintended, un-requested, multi-billion dollar tax break for some of the wealthiest corporations in the world.
BIRTH OF A REBELLION
In the California of the mid-1970s, when Proposition 13 and the anti-tax rebellion were born, local property taxes were skyrocketing. Home prices were going through one of California's notorious periods of "Holy crap how high will they go?" Since property taxes were tied to home values, people's property tax bills did just the same. Homeowners, many of them seniors on fixed incomes, were staring at tax increases of $600 to $1,000 dollars per year and getting furious.
State lawmakers knew they had a genuine rebellion on their hands but spent a full year fuddling around unable to agree on what kind of tax relief measure to approve. In the fall of 1977, two crusty conservative activists, Howard Jarvis and Paul Gann, took on the task of doing the job themselves, drafting the tax-cutting initiative that came to be known as Proposition 13.
In the Legislature the one clear thing on which both Democrats and Republicans had agreed was that tax relief should be targeted to homeowners and renters - not to corporate-owned properties. The Jarvis/Gann measure, a mammoth tax cut equal to a full sixth of all state and local revenues combined at the time, made no such distinction, giving away billions in unasked for tax cuts to some of the state's most wealthy corporations.
OKAY, WELL THAT WAS THEN
In fact, the state's established business community opposed Proposition 13, precisely because of the Terminator-sized impact it would have on public schools and services. The Bank of America, Atlantic Richfield, Southern California Edison, Southern Pacific Railroad, and Standard Oil of California, and others actually gave money to the campaign to defeat the initiative.
Most prominent Republican leaders at the time also opposed Proposition 13. Former Governor Pete Wilson, now chairman of Schwarzenegger's campaign and then the mayor of San Diego, called Proposition 13, "a meat ax approach." Twenty-five years later political amnesia has set in.
One of the main ways in which Proposition 13 cut property taxes was to allow properties to be "reassessed" (i.e. revalued for tax purposes) when those properties are sold. Most homes in California do eventually get sold and do get reassessed. Big corporate properties, in contrast, often never change hands and as a result, don't get reassessed. Young families in California who fight tooth and nail to buy their first home are paying full-price property taxes. Just down the freeway, Disneyland is still taxed based on what is was worth the year California's potential new governor appeared in "Pumping Iron" (not a Disney film). The same is true for corporate-owned properties all over the state.
In fact, California really has two Proposition 13s - one that protects homeowners
and another that inadvertently created a corporate tax loophole that has
cost the state's public services more than $50 billion and still counting.
California can preserve the integrity of Proposition 13's homeowner protections
without being saddled for another 25 years with a corporate loophole that
was really a political fluke. But to get there, state politicians and journalists
might need to work on their memory chips.
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