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Contributors
Jon Coupal- Columnist
Jon Coupal
is an attorney and president of the Howard Jarvis Taxpayers
Association -- California's largest taxpayer organization with
offices in Los Angeles and Sacramento. [go to website] [go
to Coupal index]
 Prop.
13 -- A One-Edged Sword
Saving taxpayers from government money grabs...
[Jon Coupal] 4/15/05
As if we needed another reminder why Proposition 13 is so loved
by California homeowners, the Wall Street Journal last week reported
that many states are abandoning property tax relief programs
for seniors. With one notable exception discussed below, the
property tax system in California continues to provide across-the-board
tax relief for all property owners -- thanks to Proposition 13,
overwhelmingly enacted by 66% of the voters in 1978.
As reported by the
venerable WSJ, real estate values throughout America continue
to rise. Relatively cheap borrowing costs --
notwithstanding recent upticks by Chairman Greenspan -- coupled
with a resurgent economy have put upward pressures on property
values. Other factors behind the rise in values include population
increases in many regions in the U.S. and, of course, limited
supply. As my father used to say, "God quit making land
a long time ago."
For residents of other
states, rapidly rising home values are a two-edged sword --
meaning that any advantages are associated
with equally powerful disadvantages. The advantage, clearly enough,
is a marked increase in the paper value of one's home. In other
words, a $100,000 increase in property value is a $100,000 addition
to one's net worth. The problem is that a $100,000 increase in
value -- for most homeowners -- has no positive impact on cash
flow. Sure, homeowners can "cash out" equity by borrowing
against it, but many citizens, especially senior citizens, are
rightfully opposed to taking on new debt when they have worked
their whole lives to pay off their mortgages.
The impact of rising
values to a homeowner's cash flow is, regrettably, a negative
one. With higher values come higher property taxes
because, under "traditional" property tax systems,
tax liability is pegged to current value.
Other states, pursuing
policies well short of the tax relief provided by Proposition
13, have implemented a variety of programs
to give senior homeowners some modest protection. But according
to the Wall Street Journal, even these limited programs are being
fazed out because of the voracious appetite for tax dollars by
local and state officials: "Local tax-relief programs have
been stalled, scaled back or rejected in states from New Hampshire
and Rhode Island to Iowa and Texas. Earlier this month, New Jersey's
acting governor, Richard J. Codey, proposed slashing property-tax
rebates for elderly and disabled homeowners to $800 from $1,200
to help close a $4 billion budget gap."
Thankfully, here in California, the granddaddy of all tax relief
programs -- Proposition 13 -- is not subject to the vagaries
of the elected politicians and bureaucrats wholly co-opted by
the spending lobby. The wisdom of voters in 1978 has created
a property tax system that is a one-edged sword: A system in
which one's most important investment -- one's home -- increases
in value and helps to ensure security in one's senior years while
preventing rapidly escalating property tax liability that would
otherwise vitiate all the benefits of the higher value.
That doesn't mean
Californians are completely safe. The tax-and-spend politicians
and special interests continue to attack Proposition
13 with proposals to eliminate the two-thirds vote requirement
and by new schemes to impose "parcel taxes" above and
beyond the regular property tax. Moreover, the additional tax
relief reflected by the "Homeowners Exemption" has
remained static since the 1970s. Its $70 worth of tax relief
was modest back then. Now, because of inflation, it is next to
worthless.
The barbarians will always be at the gates wanting to take Californians
down the road to higher property taxes as they have in other
states. Most Californians are wise enough to decline the invitation. CRO
Jon Coupal
is an attorney and President of the Howard Jarvis Taxpayers
Association.
copyright
2005 Howard Jarvis Taxpayers association
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