Prop 13

Rex Hime
President and CEO of the California Business Properties Association

(Editor’s Note: Yesterday’s column contained some incorrect property tax data, updated numbers appear in the piece below)

In John Wildermuth’s Fox and Hounds column last week (Prop. 13 and the Unintended Consequence), he unsuccessfully attempts to blame Prop. 13 for virtually all of California’s financial shortcomings.

What Wildermuth misses in his drive-by analysis is the fact that local revenues, like state revenues, have been increasing far past the rate of inflation for years. According to the Board of Equalization’s Annual Report, total property tax levies in 1991-92 were $17.7 billion.  In 2010-11 total property tax levies were $48.9 billion. Adjusted for inflation, property tax levies in 2011 should have been $28.4 billion with respect to the 1992 baseline.

Similarly, state spending (general fund plus special funds) since the passage of Prop 13 in 1978 has increased from $18.4 billion to a proposed $138.6 for FY 13-14. Adjusted for inflation, 1978’s rate of spending would be $64.8 billion this year, less than half of what the state will actually spend.

And local governments are remarkably successful in convincing voters to give them more money. Just this past November, voters approved 74% of 240 local tax measures, including 64% of the tax hikes that required the 2/3 majority Wildermuth calls “a raised middle finger to politicians across the state.”

In fact, since 2001, 60% of local tax measures requiring this impossible 2/3 threshold have passed. 81% of local measures requiring 55% of the vote have passed in that time.

Where is John’s evidence that local revenues are impossible to increase?

Even Governor Jerry Brown’s budget predicts that property tax revenues in California will increase by 2.5% in FY 13-14. That’s on top of the top income tax rate increase of 29% and state sales tax increase of 3.45% this year thanks to voter approval of Prop 30.

California’s income and sales tax rates are the highest in the nation. Its gas tax is 2nd only to New York and its property tax, despite Prop 13’s protections, is the 15th highest in the nation.

Voters approved Prop 13 in 1978 ago with 65% of the vote and public polling consistently shows a similar level of support today.

All of the “user pays” programs Wildermuth cites could easily be funded through current tax revenue if our elected officials chose to do so.  But they haven’t.  Instead they have promised pension benefits to public employee union members that are bringing city after city and county after county to the brink (and sometimes over the brink) of bankruptcy.

Perhaps government cannot be all things to all people.  Perhaps we need to prioritize spending so that if free parking at the zoo is a priority, then our elected officials can keep it free. Wildermuth’s simplistic argument suggests that we continue to increase taxes so our politicians can spend without making the tough choices we hired them to make.

Wildermuth has been a keen observer of California politics for decades. He can do much better than to recite the simplistic and provably false argument that local governments struggle to increase taxes. Surely he knows that of all the challenges California faces, the ability of the state and local governments to generate revenue and spend money has never been a problem.

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