Life Without Proposition 13
By Jon Coupal
In Sacramento, where the political class feels they can never get enough money from taxpayers, Assemblyman Tom Ammiano has held another hearing on the evil Proposition 13, focusing on property tax protections for commercial property. But the intent is clear, as has been pointed out by taxpayer and small business advocate Joel Fox, the real target is all of Proposition 13. Ammiano’s star witness, economist Christopher Thornberg has been quoted as saying, I can’t think of one reason in the world that Prop. 13 should exist. And Ammiano, himself, has said about Proposition 13, If it takes an incremental approach, so be it ¦ my tendency is to want to nuke it.
So, suppose those on the far left, for whom the end of Proposition 13 would mean a world filled with lollipop trees, got their way. What would California be like? Cook County, Illinois may give us a clue. A study just released by the county treasurer, the Heartland Institute and the Illinois Public Policy Institute shows that over a ten year period, property taxes collected went up 48 percent, more than double the rate of inflation, 22.5 percent. John Northdurft of Heartland warned, The property tax burden will skyrocket in the next decade, despite stagnant or declining home prices, because of growing public pension and benefit obligations. While the Policy Institute’s Ted Dabrowski told a reporter the increases where unsustainable and would result in financial collapse.
To understand the personal impact on average homeowners and small businesses of such a system, think back to California before Proposition 13, when property tax rates were nearly three times higher and there were no limits on annual increases. How many property owners could afford to pay more than twice their current tax bill? And who could budget for taxes in the coming year if the amount of increase were unknown in advance and there were no limits?
But higher, unpredictable property taxes would not be the only result of the disappearance of Proposition 13. Proposition 13 requires a two-thirds vote of both houses of the Legislature to enact state tax increases. Even with Proposition 13, California ranks first in sales taxes, second in gas taxes, third in income tax rates and tenth in taxes per property unit.
Jerry Brown, who, with his new initiative, has declared war on average folks, through higher sales taxes, and on the successful, though higher income taxes, wouldn’t have to go to the voters. Without the two-thirds vote requirement, his big spending allies in the Legislature would be glad to OK the nearly $10 billion in higher taxes he is seeking. Once the money is in hand, is there anyone out there who believes the politicians would exercise restraint next time revenue falls short of their spending?
And let’s not forget those evil businesses. California has always taxed residential and commercial property at the same rate. Politicians, government employee unions and far out, far left activists would love to increase the property tax burden on businesses, even though we are already experiencing a flight of firms to other states due to already high taxes and paralyzing regulations. These gimme, gimme, gimme interests conveniently overlook the fact that small businesses are the backbone of the California economy and it is these businesses that would suffer the most from an increase in property taxes. A new report from the Pepperdine University’s Davenport Institute reveals that taxing business property without Proposition 13’s limitations would result in $71.8 billion in reduced economic activity and a loss of 398,345 jobs over the first five years, impacts that would increase over time. Much of the damage would be to small business.
So next time someone tells you how wonderful California would be without Proposition 13, be careful — you’re talking to someone who is unhinged from reality.
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.