Proposition 13 Is the Bogeyman Again

Even before this week’s historic special election the same people and interests which drove California off the financial cliff are once again placing blame on Proposition 13. Several anti-Prop. 13 bills have already been introduced in the California Legislature to chip away at the measure’s critical protections. At the Howard Jarvis Taxpayers Association there is a saying that — with apologies to William Shakespeare — "when politicians are short on cash it must follow as the night the day Proposition 13 will be blamed."

And the issue has not been raised by just the bloated political establishment and the usual left-of-center California policy "think tanks" but also by Vanity Fair contributing editor Bruce Feirstein. Feirstein who is perhaps best known for his book "Real Men Don’t Each Quiche" has been a major contributor to a number of publications that appeal to those on the Right Coast who think it was a mistake for the pioneers to travel west of the Adirondacks.

Writing in the latest issue of Vanity Fair Feirstein not only raised the issue of Proposition 13 but expressed his view that there is no cure for our state’s budget woes until "California takes a hard look at normalizing real-estate tax assessments."

As evidence that California — now competing with New Jersey as the state with the highest tax burden — is too soft on property owners Feirstein reminds us of the comments several years ago by the world’s second richest man Warren Buffet that the taxes on his California beach house are too low.

Back in the real world where most of us cannot afford a "beach house" most homeowners do not feel their taxes are too low.

Proposition 13 bases property taxes on one percent of the base year value of a home usually the purchase price and limits annual increases in assessed value to two percent. This means that property tax increases are limited to two percent annually. Because of Proposition 13 homebuyers many of whom are spending all they can afford on a house can predict the future cost of taxes and can budget accordingly.

This tax limitation means that people who have owned their homes longer may pay less than a recent buyer of a similar property — although the recent buyer is also covered by Proposition 13 — and this offends Feirstein. However he overlooks the fact that most of those people who have owned their homes for years are retired or plan to retire soon. Few of those folks could afford to buy their own homes at today’s prices even during this market decline let alone pay the higher taxes.

Feirstein sees merit in the old system which would tax everyone at current value and as was the case prior to Proposition 13 forced those who could not pay the rapidly escalating property taxes from their homes. Feirstein complains that Proposition 13 provides a disincentive for longtime owners to sell and move because they fear losing their tax benefits under Proposition 13. Apparently he has not heard of Propositions 60 and 90 which allow older homeowners to move and retain their tax benefits while at the same time freeing up their previous homes for new buyers who can afford to pay market value.

But how about Proposition 13’s impact on state and local government? Because Proposition 13 limits annual property taxes in a rising market it also prevents major reductions in revenue in a declining market. Turns out the Proposition 13 system unlike sales and income taxes provides government its most reliable source of income.

The governor’s Commission on the 21st Century Economy whose report is due in July was created to help find ways to smooth out bumps in state revenue. Proposition 13 is an excellent example of how to do this successfully while protecting taxpayers.

Jon Coupal is President of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights.