In June of 1978 California governor Jerry Brown opposed Proposition 13, but voters passed the measure in a landslide. California’s ruling class has never ceased to attack it, and these attacks are certain to escalate with new ammunition from Nathan Gardels of the Berggruen Institute.
“The Proposition 13 property tax revolt of 1978 still defines the fiscal framework of California,” Mr. Gardels recently wrote in the Sacramento Bee. “That revolt was sustained largely by an older, white middle class reasonably, at the time, seeking to protect their assets from a bloating state.”
Mr. Gardels is right about the “bloating state,” but he neglects to explain that government growth and inflation were taxing people out of their homes. In these conditions it was reasonable that people would seek to protect their assets, but for Mr. Gardels, these were mainly older people.
In reality, young first-time homebuyers championed Proposition 13. After making the biggest purchase of their lives, in a time of rampant inflation and high unemployment, young people did not aspire to be saddled with onerous and ever-rising property taxes. That’s why nearly two-thirds of California voters, Asians, African-Americans and Mexican-Americans among them, decided to limit those taxes.
Californians might recall that, under Proposition 13, property tax rates could not exceed 1 percent of the property’s market value and could not grow by more than 2 percent per year unless the property was sold. And unlike the California Coastal Act of 1976, which created the Coastal Commission, Proposition 13 created no new state agencies and included no mandate for new state spending.
Proposition 13 applied to all Californians, regardless of ethnicity, but for Gardels it was mainly about older “white” people. These old folks may have had a legitimate complaint, but in his view they represent the past.
“The political constituency of California’s future,” Mr. Gardels explained, “is largely Latino, Asian and youthful.” And this constituency of the future “is seeking to build their assets through upward mobility.” And for Mr. Gardels, that changes the equation.
“For aspirational constituencies striving to reach the middle class,” he wrote, “the most important thing is an opportunity web and trampoline to boost their chances.” Trouble is, “even though California has one of the most progressive tax structures in the nation, inequality is rising and dashing hopes.”
So if progressive taxes, which means higher and more punitive taxes, are not serving as a trampoline and opportunity web, what might do the job?
Mr. Gardels wants a new philosophy of governance that focuses on the “overall progressive outcome.” In this vision, the very high state income tax should be reduced “while extending a sales tax on services.” Politicians will be happy to oblige.
Proposition 13, meanwhile, prevents the state from inflicting punitive property taxes on all Californians. It is one of the few measures actually to limit the power of government.
If ruling-class types find it objectionable, there is something they can do: Craft a measure that nixes Proposition 13, pegs property taxes at 10 percent of the property’s value, and allows increases of 15 percent per year. Put that on the 2016 ballot and let California voters decide.
If facing the people proves too daunting, maybe the Berggruen Institute—a group “dedicated to the design and implementation of new ideas of good governance” —can offer a 12-step plan to trim California’s bloated government. As Mr. Gardels makes clear, the government’s appetite for more of the people’s earnings remains ravenous as ever.
Lloyd Billingsley is a policy fellow with Independent Institute in Oakland. He and his family bought their first house in California in 1977.