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The Role of Prop. 13

James Fallows reminds us that California might be a liberal state, but it's constrained by the mother of all conservative tax structures: Proposition 13.

Pre-Prop 13 (as Benjamin Schwarz points out in his review of the great new Kevin Starr book), California dreamed big and spent big. Post-Prop 13, everything about California's fiscal situation has changed. It's not simply the cap on property taxes; it's also the legislative super-majorities and electoral contortions required to raise money for anything, which are part of a general dysfunction of government structure in the state. Proposition 13, of course, was an anti-tax "Red State" measure of the purest form. You can argue about exactly how crucial a role it plays in the current disastrous situation. But to omit any mention of the topic and pretend that California's problems reflect the outcome of pure liberalism is not trying hard or even respecting the reader.

If you're interested in this stuff, I'd recommend Isaac Martin's The Permanent Tax Revolt: How the Property Tax Transformed American Politics.

By Ezra Klein  |  August 5, 2009; 6:13 PM ET
Categories:  California  
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Comments

And by really strong unions.

Why hasn't anyone seemed to notice that unions destroy pretty much everything they touch. They're like cancer.

What if the Democrats proposed disbanding the public employee's union as a cost cutting measure for healthcare reform? Or perhaps they could propose increasing the eligibility age for social security in proportion to a decrease in the eligibility age for Medicare. That would make this wackiest of reality TV shows more interesting.

Posted by: fallsmeadjc | August 5, 2009 6:53 PM | Report abuse

And do you know why Fallows mentions it? Because of Douthat's idiotic Monday column.

Posted by: Calvin_Jones_and_the_13th_Apostle | August 5, 2009 7:06 PM | Report abuse

Don't forget bears, fallsmeadjc. California is constrained by its many bears.

Posted by: dcamsam | August 5, 2009 7:22 PM | Report abuse

Ezra,

What I find laughable in discussions about my home state is the "liberal" moniker for a state that has had a Republican governor for 24 out of the last 28 years... that has a line-item veto no less!! In addition, our state can't pass a budget without a 2/3 super-majority, meaning nothing gets done unless the Democratic majority provides significant concessions to the Republican minority (read CUT TAXES OR ELSE!).

Oh, then there's the Son of Prop. 13, that says you need a super-majority to raise any fees that could be based on property, and the only people who get to vote are the actual property-owners (damn the renters).

Hell, considering our state passed Prop 8, banning gay marriage, I believe we've now officially sliped to being more conservative than, say, Iowa. Mid-west here we come!

Posted by: Jaycal | August 5, 2009 8:25 PM | Report abuse

Prop 13 is a huge problem for California. We have profited greatly by our low property taxes over the years, but we would totally agree to pay more taxes in order to help California get out of this mess.
I understand that a group, started by SF Assessor Phil Teng,is going to take on Prop.13. If so, it's way past time!

Posted by: LindaB1 | August 5, 2009 8:39 PM | Report abuse

Just out of curiosity- have there been serious attempts to have prop 13 overturned before the current crisis? I really don't have any idea how close it has ever come to being overturned and how much democrats have fought against it over the years.

Posted by: spotatl | August 5, 2009 8:45 PM | Report abuse

Without defending Prop 13, I note that Ca. state taxes and spending rose far faster than population + inflation even during the Arnold years. It's hard to see that Prop 13 has constrained spending.

You could argue that in general asset taxes are better (more progressive, less volatile, or whatever) than income taxes, but that's a different question.

Posted by: lfstevens | August 5, 2009 11:05 PM | Report abuse

One of the guys at Calitics said it best, (in so many words) these limitations guarantee that the Californian GOPers, no matter how small a minority, are always guaranteed that their agenda and not that of the majority party is always the one that's passed.

Posted by: leoklein | August 5, 2009 11:29 PM | Report abuse

Ca. spending has risen much faster than population + inflation, even during the Arnoldium. While Prop. 13 isn't great, it's impact is highly overrated.

You could argue that it's better (more progressive, less volatile) to tax assets than income, but it hasn't prevented Ca. from spending and spending and spending.

Posted by: lfstevens | August 6, 2009 12:56 AM | Report abuse

The state mandate to cut the car tax played a role in this, too.

When you know that any new spending you propose will never be paid for with a corresponding tax increase, it just creates an incentive to spend more, because you never feel the "pain" until a decade down the road when the chickens come home to roost.

It's tempting to claim that the problem isn't the tax cuts, but the spending, but the two went hand in hand. Tell voters that any new spending plan will have to be paid for with a corresponding tax increase, and they'll think long about whether they *really* want that new spending. However, if you *guarantee* that their taxes will never go up, which is what the structure of CA law ensures, that new spending seems "free," so voters and politicians don't think twice about spending more money.

Posted by: tyromania | August 6, 2009 1:34 AM | Report abuse

Don't forget that prop 13 was ushered in by an earlier housing bubble. Folks were seeing their property tax go up 25% a year, creating nearly universal support among property owners. Of course, capping property taxes allowed real estate prices to rise even faster.

One of the biggest effects of prop 13 has been a massive shift of the property tax away from commercial real estate onto homeowners. This is because there are many ways to disguise transfer of ownership for commercial properties (e.g. the "owner" itself can be sold), whereas when homes are sold they are reassessed at market value. The limit on reassessment was sold as a way to keep grandma from being taxed out of the family home, but the biggest beneficiary was business.

Posted by: idlemind | August 6, 2009 5:10 AM | Report abuse

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