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One More Time: Budget Woes Not Prop 13's Fault
by Jon Coupal 1/8/08

The myths, misunderstandings and outright lies regarding Proposition 13 and its impact on California are legion. In fact, they often provide comic relief as when the Howard Jarvis Taxpayers Association -- with apologies to David Letterman -- compiled its list of Top Ten Ridiculous Things Blamed on Proposition 13. My personal favorite is how Prop 13 has caused a dramatic increase in the obesity of children.

Jon Coupal

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]

Our Howard Jarvis Taxpayers Association members are accustomed to uninformed members of the media, entrenched bureaucrats and liberal politicians uttering falsehoods about Prop 13. But we are surprised when fair-minded pundits like Dan Walters take a sip of the KoolAid. Walters, of course, is the political columnist for the Sacramento Bee whose work is syndicated throughout California. He is well-respected, included by this writer, for his insights on California's Capitol environment as well as his commentary on the demographic trends of the Golden State that portend serious problems.

But, according to Horace, even Homer nodded.

Without qualification, Walters states that California's fiscal mess "began 30 years ago this year when voters, fed up with rapidly rising property taxes, passed Proposition 13, which slashed those taxes by more than half." But if the current budget problem is a lack of revenue -- which it isn't, of course, but let's pretend -- then we still can't blame Prop 13 for today's budget imbalance. Why? Because about 5 years ago, the inflation adjusted, per capita property tax collections in California began to surpass Pre-Prop 13 levels.

Not only is it unfair to suggest that the fiscal problems began in 1978, but it should be obvious that, even back then, Prop 13 reflected wise public policy. Contrary to the dire predictions, California enjoyed a robust tax-revenue-producing economy immediately after its passage. And today, even with the sub-prime shots at the housing market and lower home values, property tax revenues continue to increase because of Prop 13's unique acquisition value method of assessment.

It is no surprise, therefore, that other states today are looking at Prop 13 as a model for taxing property -- something they would be unlikely to consider if a valid case could be made that the initiative was the seminal cause of California's budget crisis.

In addition to being simply wrong about Prop 13, Walters makes another uncharacteristic error by tying events in the wake of 13 to today's problems by stating that "after its (Prop 13's) passage, [Governor Jerry Brown] and lawmakers overreacted by slashing state taxes while assuming new burdens for schools and local governments." True, there was a rush, which continues today, to expand government at all levels and yes, true again, that Jerry described himself at the time as a "born again tax cutter." But this bare assertion is meaningless without the context of present tax rates and present per capita tax burden. (By the way, the inheritance tax was virtually eliminated shortly after the passage of Prop 13, but done so by the People via initiative over the objections of the politicians.)

Precisely what state taxes did the governor and legislature "slash" and, in any event, are not the tax rates today much higher than they were in 1977? Of course they are. Sales tax rates -- and all their constituent state and local elements -- are much higher. Income tax rates are the highest in the nation driving high income earners like Tiger Woods out of the state.

We also disagree with Walters' take on California's relative tax burden when he suggests that California ranks in the middle compared to other states. Not according to recent data. We are already in the top 10 in per capita taxation (probably 6th) and frankly, if we were to compensate for the undocumented -- who pay little in taxes but inflate our population numbers -- we would probably be number one.

If Prop 13 and other tax cuts aren't the problem, what is? Overspending. Walters, perhaps inadvertently, refers to the extraordinary increase in general fund spending when he addresses the explosive growth in the Corrections budget. The reality is that California has a budget that has gone from about $10B in 1977 to over $100B today. This ten-fold increase far exceeds both inflation and population increases. Lack of spending discipline, not Prop 13 or the few modest tax reductions we have been given, is the seminal cause of our budget problem. CRO

copyright 2008 Howard Jarvis Taxpayers association



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