By Chuck McFadden/Calbuzz
As a political matter, Proposition 13 is sacred. It’s been described by lazy reporters as the “Third Rail of California Politics” so often that you probably want to hurl every time you hear the phrase.
As a policy matter, however, Proposition 13 rests on a fundamental inequity: it provides a gaping, pro-corporate loophole that pushes the statewide burden for property onto single-family and other residential homeowners. As Calbuzz has reported, data from the Board of Equalization and county assessors proves that “in virtually every county in the state, the share of the property tax borne by residential property has increased since the passage of Prop 13 in 1978, while the share of the property tax borne by non-residential property has decreased.”
Forget fairness, though: If you want to start taxing business the same way you tax homeowners, you’ll have every chamber of commerce in the state and taxpayer groups come down on you like Chris Christie on a chocolate éclair. Not that it would count for much, but the Republican Party would oppose any modification as well. Unless you’re heavily into masochism, forget it.
But here’s a news flash, pessimists. A Public Policy Institute of California poll has just found that almost 60 percent of likely voters favor changing the rules to tax business and homes the same way – i.e., a split roll system. Even 43 percent of Republicans like the idea.
Combatting conservative cliches: The problem is many people simply don’t understand that Prop. 13 gives business the ability to legally evade higher property taxes by maintaining a fiction of continuing ownership while homeowners can’t. Ordinary folks get dinged, big time, when a house changes hands, which explains side-by-side houses with huge differences in their taxes. Any disinterested observer knows that’s weird.
A campaign to restore fairness to property taxation would have every mayor, city council member, county supervisor, school superintendent and teachers union on its side, falling asleep with visions of more police officers, more firemen, and fewer potholes.
But California’s reputation already ranks as the worst state in the union for business. Wouldn’t changes to the tax system that makes business pay more in property taxes make it worse? Not to worry. No one pays much attention to Rick Perry.
A fairness campaign would face two major hurdles. First, you have to wage an initiative campaign to get a Prop. 13 modification on the ballot; then, a second campaign to get the initiative approved by voters. Prayer won’t work here. Only realpolitik will.
Prop. 13 for the 1%: Here’s how it could work: The biggest issue in national politics now is the absurd level of wealth distribution between the plutocrats and everyone else. That sets the stage to use the strategy that is the gold standard for today’s political campaigns: Resentment.
The campaign overcomes pro-corporate bleating with a message that casts the election as a choice between the little guy and the one percent. A TV ad portrays a repulsive capitalist – Tom “Kristallnacht” Perkins comes to mind – morphed into a top hat and a diamond stickpin. His message: working people have it too good; he’s entitled to the riches that Prop. 13 give him, and talk of reducing homeowners’ taxes by changing the system is dangerous socialism. Another spot focuses on Jamie Dimon’s recent, disgraceful 74 percent raise — $20 million a year — at J. P. Morgan.
The connection between Dimon’s raise and Prop. 13 may be a bit indirect, but Little Guy vs. Big Guy works with voters every time; in this case, that message has the virtue of being true.
Where, however, would the millions needed to overcome the misleading ads of the other side come from? Not from good government groups. They have the facts on their side, but they don’t have the money on their side. And don’t count on presumed good-government advocate Jerry Brown. When last heard from on the subject, he said he “welcomed the discussion.” Whoopee.
The solution is to take advantage of an emerging tradition in California politics: Find a progressive Silicon Valley tycoon. An idealistic billionaire. There must be at least one or two left out there somewhere.
Use the cash to hire a high-powered campaign management firm (The 132-page state constitution specifies that all California campaign management firms must be described in news stories as “high-powered,” with the exception of Meg Whitman’s 2010 handlers. It’s the law; but I digress) to run a class-warfare campaign on behalf of tax fairness.
Bottom line: Building a campaign on emotion rather than bone-dry statistics might make goo-goos and liberal idealists shudder – oh, dear, do the ends justify the means? – But it’s the best shot at correcting something that badly needs correcting in California.
Chuck McFadden covered politics for the Associated Press in Sacramento. His biography of our very own governor, Trailblazer: A Biography of Jerry Brown is out from the University of California Press.
bob dorn says
Just eliminating the “continuous ownership” exemption corporations enjoy would seem to allow the state to drag a level tax from the cold, spiny hands of Dr. “Kristallnacht” Perkins.
Jerry Brown to address this address Prop. 13? Really? This is the same so-called progressive who brought this referendum to the table in the 70s – and helped to push it through! This wretched bug in the California tax system has got to go.
It simply kills me that young people have to put up with this legacy of the well-to-do and “behind the wall” types. The fortress and NIMBYism is so obvious. But what’s worse is that Prop. 13 is dysfunctional since it doesn’t address the real time market forces by setting this artificial regulation that stops transfer taxes from going up with real property values. Somebody else has to pay for the imbalance. Side by side homes of differing tax structures make no sense. Neighborhoods of shared community values is hindered by this stupid legislation. Redistribution of the tax welfare state begins here.
Dave Rice says
I can understand how Prop 13 has some benefits – wild (and often unsustainable) property values could force responsible homeowners out of their properties if they had to face annual tax increases of hundreds of dollars, eating monthly budgets. And the “poor seniors living on a fixed income” upon whose backs 13 originally passed would certainly feel the biggest squeeze in their monthly budgets.
I favor a two-tiered system for owner-occupied residential property and investment property – let an owner claim one residential property (heck, throw a bone to the rich and make it two for a vacation home) that would be subject to 13’s cap on tax increases, with all non-owner-occupied residential and commercial/industrial property subject to regular re-assessment regardless of whether or not it’s changed hands. It protects the benefits of 13 for actual, bona fide homeowners while increasing the revenue stream dramatically from businesses that are proven to be profitable enough to acquire and continue to hold property – though it might affect their ability to leverage somewhat.
Full disclosure: Dave is a licensed real estate and mortgage broker who primarily deals with first-time buyers and other homeowners, though his family business includes a property management aspect whose profitability would definitely feel a negative impact if our rental holdings were to be hit in the way he’s suggesting. Still, he thinks it’s fair.
Dave – That’s a great thought. Thanks for implying that all non occupied rentals currently get a break back to 1970s level of taxation! I must be completely uninformed – but that just blows my mind! That is a sick tax break! Ugh – no wonder I couldn’t find a decent first time home! All the stock is taken up by hording in the older decrepit parts of town. These places should be a bargain, if they were actually on the market. But due to the wonder of history we now have in place a lousy proposition 13. I still cannot believe my parents were alive to vote on this…thanks a whole bunch! Let’s all move to the suburbs and commute for hours for our kids’ sake. Fair is fair.