Based on poll results presented to a June 6 conference at the University of California commemorating the 30th anniversary of the passage of Proposition 13, there was a general consensus that the landmark initiative will be around for many more such commemorations.
Mark DiCamillo, senior vice president of the Field Corporation, told the 100 or so people at the conference that if Proposition 13 had been on the June ballot, it would have passed overwhelmingly. According to a Field Poll conducted in late May, voters still support the property tax-cutting initiative by a 57 percent "yes" to a 23 percent "no" margin.
(Cal-Tax: A recent poll by the Public Policy Institute of California and another conducted for the Howard Jarvis Taxpayers Association by Arnold Steinberg also revealed overwhelming public support for Proposition 13.)
When the Field Poll asked Californians about lowering the two-thirds vote requirement for state taxes to a majority vote, respondents soundly rejected the idea – just 23 percent approve, while 72 percent disapprove of lowering the vote requirement.
Attendees at the conference, held in the Lipman Room atop Barrows Hall on the picturesque Cal campus in Berkeley, also heard new insights about Proposition 13 from three all-star panels of experts on the proposition.
Some of the highlights:
Proposition 13 Did Not Shift Property Tax Burdens to Homeowners. Cal-Tax's David R. Doerr presented new research showing that the assessed value of non-homeowner property subject to Proposition 13 has grown faster than the assessed value of homeowner property. Homeowner values have grown 8.3 percent a year on average. Other property subject to acquisition value grew an average of 8.5 percent annually. Tables presented by Mr. Doerr also showed that on average, for years where comparable data exists, homeowner values were assessed at 66 percent of market value, while business property was assessed at 75 percent of market value.
Another little-known feature of Proposition 13, Mr. Doerr explained, is that it reduces the volatility of the property tax. When there is a substantial surge of market value, assessed values grow slower than the market. However, when market values fall, assessed values generally still grow, or do not drop as much.
Proposition 13 Has 'Progressive' Tax Impact. UC Davis Professor Steven Sheffrin explained how Proposition 13 has a "progressive" tax impact. He said if all homes were assessed at market value and the tax rates were lowered so there would be no fiscal impact, low-income homeowners would see a net tax increase and high-income people would get a tax reduction. He said 82 percent of the elderly would be worse off.
He added that the property tax is not based on the two generally accepted tax principles: ability to pay or benefits received.
Proposition 13 and Social Security Have Same Underlying Basis That Makes Them Politically Untouchable. John Fund, a reporter for the Wall Street Journal, noted that both Proposition 13 and Social Security are politically untouchable, and for the same reason: Both provide security, particularly for seniors.
Proposition 13's Role in Spread of Tax Limitations. UC San Diego Professor Isaac Martin described Proposition 13's role in spreading tax limitations around the country. Within 10 years of Proposition 13's passage, 16 states adopted tax limitations, although not all were due to Proposition 13. He explained the pivotal role that the Jarvis-Gann initiative had in shaping federal debates on fiscal policy.
Proposition 13 Caused by Serrano Decision? Dartmouth Professor William Fischel explained his theory that the California Supreme Court's Serrano decision had a causal relationship to the passage of Proposition 13. The 1971 decision, which said differences in school districts' per-pupil spending (due to differences in property tax collections) were unconstitutional, caused the Legislature to establish a system whereby the property tax is generally irrelevant to school spending. He said that after Serrano, voters no longer saw a connection between the property tax and good schools, and thus were willing to vote to cap the tax. During a question-and-answer period, several attendees took issue with this theory.
Proposition 13 and Homeowner Mobility. Cal State Sacramento Professor Terri Sexton described the "lock-in" effect of acquisition value assessments for some homeowners. For homeowners who are recent purchasers, there is no effect. However, there is less of a tendency to move when the move would cause a big increase in property tax. She discussed the advantages (neighborhood stability) and disadvantages (long commutes for some) of this lock-in effect.
She also noted that Proposition 60 and Proposition 90 deal with this lock-in effect for people age 55 or older, and she added that Florida recently passed a law allowing homeowners to take their base-year value with them when they move.
Proposition 13 Sets Example for Ballot-Box Budgeting. Peter Schrag, long-time columnist for The Sacramento Bee, described how Proposition 13 was followed by various measures increasing and decreasing taxes, and by other ballot-box spending programs, including the stem cell bond issue.
Proposition 13 and Fiscal Adaptation. Dr. John Kirlin, a former University of Southern California professor and now director of Delta Vision, discussed how localities have adapted to Proposition 13. He noted that California's state and local government expenditures have grown in total and in most categories.
Some examples of fiscal adaptation are county sales taxes to fund transportation, shift of infrastructure costs to developers, increased use of debt, and local land development decisions to increase sales tax revenues.
Revolutionary Impact of Proposition 13. Joel Fox, former president of the Howard Jarvis Taxpayers Association and now head of his own political consulting firm, said the fundamental and revolutionary change instituted by Proposition 13 is the change in local budgeting. He said, "For the first time in the history of property taxation, certainty in taxes belonged to the taxpayer instead of the tax collector."
Before Proposition 13, property tax was the last thing considered by local officials, he said. After the budget was set and all other revenue was counted, the property tax filled up the difference. After Proposition 13, property tax revenue has been considered first, and other revenues and spending work off this fixed amount. He also described what he thought Howard Jarvis' reaction would be today: "I told you so."
Adam Smith Remembered. Both Dr. Sheffrin and Mr. Fox reminded the conference of Adam Smith's writing in The Wealth of Nations: "The certainty of what each individual ought to pay is, in taxation, a matter of so great importance that a very considerable degree of inequality … is not near so great an evil as a very small degree of uncertainty."
Two-Thirds Vote for Taxes Attacked. Despite the Field Poll's new finding of overwhelming voter support for a two-thirds legislative vote for state tax increases, Jean Ross, head of the California Budget Project in Sacramento, attacked this feature of Proposition 13. She called it undemocratic, and said the goal of Proposition 13 was to reduce the size of government.
Proposition 13 After 30 Years – Summing it Up. Dr. Jack Citrin, head of the Institute for Governmental Studies at Cal, listed five points about Proposition 13 after 30 years that he said would represent a consensus:
1. It reduced the property tax.
2. It slowed the rate of growth of government.
3. It established the initiative as a major force for determining fiscal policy.
4. It changed the nature of the state-local government relationship.
5. It is entrenched in popular support.
Conference Audio Available on the Web. More information about the conference, including handouts and charts used by speakers, is available by accessing the Institute for Governmental Studies' website at www.igs.berkeley.edu. Dr. Citrin said that within a few weeks, the audio of the conference also will be available on the site.
Cal-Taxletter
June 13, 2008
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2008 California Taxpayers' Association. All Rights Reserved.