Chicago, Carl Sandburg’s “City of the big shoulders,” is about to find out just how heavy a tax burden homeowners are able to bear. Mayor Rahm Emanuel has revealed his plan for a massive property tax increase to pay for unfunded pension obligations. And for taxpayers, it isn’t pretty. The mayor wants a $543 million increase in property taxes to cover police and fire pensions, as well as additional taxes and fees to close a projected $745 million budget shortfall.
How much this will cost the average homeowner is not yet clear. Emanuel is seeking approval from the Legislature to exempt those homes worth less than $250,000 from the increase, meaning more valuable properties would absorb the entire burden.
The uncertainty may also be contributing to a decline in home values in recent months, as shown by the Case-Shiller Home Price Index. Buyers may not be so ready to cut a deal that will see them inheriting a massive property tax hike.
In order to illustrate the seriousness of the city’s fiscal crisis, and perhaps to make it easier to extort more from property owners, Emanuel is claiming that without the additional revenue, public safety will be decimated. Twenty percent of the police force and forty percent of firefighters will lose their jobs, he threatens.
Still, two years ago, the mayor foreshadowed the coming tax increase when he warned that in order to pay the mounting bill for government employee pensions — a bill that would triple in 2015 when a balloon payment comes due — property taxes could be forced to go up 150%.
This is a frightening scenario for homeowners, but not so much for homeowners in California. For us, notwithstanding equally daunting pension problems, the good news is Proposition 13. Although city mismanagement is also common to California – a number of cities have been forced to file for bankruptcy in recent years, largely due to exploding government employee pension debt – officials are prohibited by Proposition 13 from soaking property owners to cover up their dereliction. While Chicago homeowners are sitting ducks for higher property taxes, in California, increases are limited to two percent annually.
Add to the property tax limitations that Proposition 13 gives voters the final say on new local taxes and requires a two-thirds vote of each house of the Legislature to increase state taxes, and it becomes easier to understand why it is a target of so many Sacramento politicians, most of whom owe their election to their government employee union allies. If they can eliminate the impediments to tax increases established by Proposition 13, the politicians will be in a much better position to repay and reward their political benefactors.
Without Proposition 13 Californians could soon experience what it is like to live in Chicago without ever having to leave their homes. And it could be even worse. Chicago’s budget director has already gone on record as saying Mayor Emanuel’s property tax increase is not enough.
Citizens Exhausted By Hypocrisy
Exhaust is what was emanating from the idling 3 ton SUV bearing state license plates sitting at the curb outside the Griffith Observatory. The parked vehicle’s engine continued to run for over an hour, according to news reports.
Inside the observatory, overlooking downtown Los Angeles, a ceremonial signing of major legislation was taking place. Amidst self-congratulation by members of the political class in attendance, Governor Brown added his signature to legislation mandating that half of California’s energy come from renewable sources within 15 years.
The bill by Senate Pro Tem Kevin de Leon, a Los Angeles Democrat, originally contained language requiring a 50 percent reduction in petroleum use by 2030. This draconian feature contained no specific formula for reducing gasoline use, leaving it up to the unelected California Air Resources Board (CARB) to implement restrictions that could have included massive fees, gas rationing or driving restrictions. Moderate Democrats and Republicans united in opposition to adding to the burden on working families already paying the highest gas prices in the nation, and de Leon was compelled to remove the restrictions on petroleum use.
Brown has blamed lobbying by the oil companies – not the thousands of angry constituents who called their representatives — for the Legislature’s failure to cut back gasoline use and he has promised to implement the restrictions using CARB, whose 12 members are appointed by the governor. (Just approved legislation will allow the Legislature to approve two members.) This approach of going around lawmakers, who represent the people of California, is reminiscent of President Obama’s using executive orders to circumvent Congress in order to make changes to the Affordable Care Act and to halt enforcement of immigration laws.
Even without the de Leon legislation, the state has the nation’s highest air quality standards and, due to legislation passed in 2006, a third of electricity is required to be provided by renewables by 2020.
The problem remains that California has a weak economy and stringent restrictions on energy production will add to the cost paid by average citizens. Many see this legislation as overly severe and agree with State Senator Jim Nielson who has stated that energy, food and all things that require abundant affordable energy to produce and transport will become more expensive, hurting California families least able to afford it.
Meanwhile, back to the SUV sucking up taxpayer financed gasoline: After chatting with reporters for nearly an hour after the signing ceremony, Senator de Leon entered the vehicle and was driven away. It was a hot day and, no doubt, the senator enjoyed entering an air conditioned interior as he was about to be chauffeured to his next appointment.
Although we didn’t get a close look, it would not surprise us if there were a bumper sticker on the back the senator’s ride that read, “Do as I say, not as I do.”
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.