Proposition 13 and Milton Friedman

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Yesterday on this site, Joe Mathews argued that conservatives and Republicans were not adhering to the philosophy of one of their guiding lights, Nobel prize-winning economist Milton Friedman, by resisting any change to Proposition 13. Mathews stated that Friedman would prefer cuts in income or sales taxes rather than property taxes.

It is true that Friedman believed that property taxes would be reflected in the housing cost and that the cost of the house would be adjusted according to the amount of property tax that had to be paid on the property. However, this economic theory did not take into effect uncontrolled property taxes on property that was not on the market.

The issue of ability to pay is paramount in discussing Proposition 13. The reason seniors and others were forced out of their homes before Proposition 13 passed was because their income did not keep up with housing inflation, which dramatically increased property assessments. Since property taxes do not necessarily reflect an ability to pay, the property tax has set off many tax revolts over the years, not only in California, but, around the country. Some economists have labeled the property tax the “worst tax” for this reason.

In California, tax historian David Doerr noted, “The epochal changes in California’s tax structure since 1850 all stem from an effort to provide property tax relief.”

Milton Friedman did support Proposition 13 (as Mathews noted) and even made a campaign television commercial in support of the measure. In fact, according one of the chief campaign consultants, Bill Butcher, Friedman’s “boring “ ad was the most effective ad the pro-Prop 13 forces ran. It was reassuring to voters, Butcher said, that a Nobel Prize-winning economist stood in front of a camera to reassure them: “Don’t let politicians fool you. Proposition 13 will work.”

In a short interview I did with Friedman for my book, the Legend of Proposition 13, six years ago, he told me, “The political effect (of Proposition 13) was very good in moving us in the direction of lowering taxes.”

One part of Proposition 13 that Friedman was particularly fond of was the currently much discussed two-thirds vote to raise taxes. He told the Copley News Service in 1978 that the two-thirds vote might be the most important feature of Proposition 13 to prevent additional tax increases.

While Friedman may first support a cut in income and sales taxes, I suspect he would approve of tax reductions across the board, including property taxes.

As far as the voters are concerned, support for Proposition 13 seems to have solidified over the years. The newly released Field Poll analysis of political trends over the past 30 years finds Proposition 13 support holding steady, while opposition to the measure has lessened. While Proposition 13 received a 57% to 34% advantage in the 1978 Field Poll, the 2008 poll had support at 57% while opposition fell to 23%. Among Democrats while support remained steady at 49% in 1978 and 48% in 2008, opposition dropped a full ten percent from 40% to 30% over the last three decades.

I think it is safe to say that if Milton Friedman were asked today if he would vote for Proposition 13, his answer would be yes.

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