Proposition 13:
The Drama
Plot Summary
What is Proposition 13?
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“People's Initiative to Limit Property Taxation”
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Caps property tax rates at no more than 1% of full cash value
and caps increases in assessed value per year are capped at
either 2% or the percentage growth in the Consumer Price
Index (CPI), whichever is less.
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New construction and the sale of property, with some
exceptions, also increase assessed values.
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Required a two-thirds majority in both legislative houses for
future increases in all state tax rates or amounts of revenue
collected, including income tax rates
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Received an enormous amount of publicity throughout the
United States.
Setting the Scene
Serrano v. Priest
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1971 and 1976 Supreme Court rulings
saying that educational funding was
favoring the wealthy.
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State legislatures responded by capping
the rate of local revenue that a school
district could receive and distributing
excess amounts among the poorer
districts
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Property owners in wealthier
neighborhoods were unhappy that
they could no longer see the
immediate benefits from their taxes.
Housing Demand
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Growing population in the state
caused an increase in demand for
real estate
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As demand increased, prices also
increased, along with taxes
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Elderly citizens on fixed income
became unable to afford their
homes with the growing tax rates,
a fixed income, and inflation.
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The Proposition 13 campaign felt
that elderly citizens should be able
to keep their houses (and then
increased wealth they acquired)
without being forced to pay the
property taxes that go along with
it.
Playwrights
Proposition 13 was originally popularly known as the “JarvisGann Amendment”
Howard Jarvis and Paul Gann’s actions had a greater impact as
a symbol of citizen initiated reaction against what was
perceived as big government
Howard Jarvis
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Born in Magna, Utah
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Father was a state supreme court judge and member of the
Democratic Party.
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Jarvis was active in the Republican Party and also ran small
town newspapers
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Primary candidate for the U.S. Senate in California in 1962
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Founded the Howard Jarvis Taxpayers Association, which
basically opposes all new and old taxes on Californians
Paul Gann
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Born in Clark County, Arkansas
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Founded People's Advocate in 1974, an organization
“dedicated to educating and mobilizing the public regarding
issues of taxation, government spending, personal freedoms,
property rights and maintaining government responsiveness
to the will of the people.”
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1980 Republican challenger in the United States Senate race
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Avid crusader for lower taxes
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Died of AIDS, contracted from a blood transfusion, in 1989.
The Aftermath
The effects of Proposition 13
Nordlinger v. Hahn
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Acquisition value system of Prop 13 created dramatic disparities in
the taxes paid by persons owning similar pieces of property
because of the differences in the terms for which they were
owned. Newer buyers were paying far greater amounts for their
property.
•
Former Los Angeles apartment renter who had recently purchased
a house in Los Angeles County, filed suit claiming that the
proposition violates the Equal Protection Clause of the Fourteenth
Amendment
•
Court dismissed the complaint, saying that states had the right to
discourage the rapid turnover of housing through taxation.
AB 80
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Home values skyrocket,
particularly after AB 80, a
reform bill, was passed
•
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AB 80 held tax assessors
to keep assessments a
uniform percentage of
market value so tax figures
could not be fudged to
reward friends
Cities rely more on the
state government
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Since cities cannot collect
as much property tax, they
must look to the state
government for funds
Sales Tax
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Sales tax is heavily relied
on
•
•
•
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Cities must impose a
harsher regressive sales tax
in order to make up the
difference
In the place of a
progressive tax
Fair?
Housing is scarce because
cities attempt to build salestax generating businesses,
not houses
•
House prices are inflated
Schools
• School funding by property
tax is declared
unconstitutional (Serrano vs.
Priest)
•
•
Money from taxes is not
going to the immediate
community, but is
distributed evenly across
California
Total amount of money put
into education declines until
Proposition 98 is passed in
1985
Cities
• Public services in
cities suffer from
the loss of revenue
•
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Firefighting
programs, police
departments, and
libraries all suffer
major budget cuts
Cities cannot afford
the upkeep of
roads and public
utilities
Food for Thought
Is it fair?
• Equity and Efficiency
• These two ideal characteristics of a tax law are
absent in the freezing of the property tax
• The better established and wealthier are subsidized
• Properties of the same value may be taxed differently
depending on the year bought
• No incentive to sell houses for fear of a new
assessment and higher taxes creates a stagnant house
market
• Cities lose so much revenue that public utilities suffer
• Corporations, if the deed is kept, can avoid paying
higher taxes even if the property physically changes
hands
Why not repeal it?
• Proposition 13 is the
“third rail” of
California politics
•
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It would completely
upset the system that is
already in place
Realistically, people will
not volunteer to pay
extra taxes
As the Curtain Closes
• It’s all relative
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•
•
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From the view of an elderly homeowner, an established
homeowner (any income), or a homeowner in a position
to sell at a profit, Proposition 13 is undoubtedly
beneficial
As a buyer or a new family, Proposition 13 is awful
Utilities, school funding (investment in future
generations that will support the vast majority in old age
and advance progress), and other essential public
services might be a better long-term investment, even if
property taxes are unappealing
Is it worth the loss?
Bibliography
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www.wikipedia.com
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http://www.caltax.org/research/prop13/prop13.htm
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www.krankyscartoons.com/local.htm
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http://blogs.indystar.com/varvelblog/09122006.jpg
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http://www.eddata.k12.ca.us/Articles/Article.asp?title=Proposition%2013
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http://www.caltax.org/research/prop13/prop13.htm
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http://everything2.com/index.pl
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http://query.nytimes.com/gst/fullpage.html?res=950DEEDF133
1F931A2575AC0A96F948260
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http://www.law.cornell.edu/supct/html/90-1912.ZS.html