86 Prop 13

Thursday, February 19, 2009

California's budget mess is making headlines these days, so I thought a little illustration of it's major shortcoming would be appropriate.
Proposition 13 became law back in 1978. It, along with the recent Proposition 8, are clear indicators that the proposition system should be abolished. People with axes to grind or ideologies to push use propositions to codify their ideas into law.

Since propositions are voted upon directly by citizens, they are usually pushed with over-the-top fear campaigns and misleading tactics.
Proposition 13 has two major parts: first, it requires a 2/3 majority of the legislature for any tax increases. Second, and arguably more damaging, it radically changed property taxation.

The gist of it is this: property is only assessed when it is sold, and after it is assessed the taxes can't be more than 1% of that value. This was promoted as a way to save seniors from the rising value of their property and keep them in their homes. They were the only ones who benefited. The rest of us got the shaft.

Here's a clear demonstration of the effect Proposition 13 had on my neighborhood. Here are eight houses around mine (my house has the bold outline), listing the square footage and the annual tax paid last year.



(Disclaimer: while my house has the highest taxes in this image, there is one house on my street just out of view which paid $200 more, it is 936sf.)

It is worth noting that while there is a great disparity in taxes paid, the largest and most shocking difference is those two houses across the street from me. Both of them are owned by an elderly couple who also own houses on the next street. They are all rentals — the seniors do not actually live in them and I can only assume that they never lived in all of them at once. The renters have tried to buy the houses but were rebuffed because the houses are in trust for their descendants... which means that those houses will continue to generate little tax revenue even after the "owners" have died. Prop 13 has created a disparity far outside the "save seniors money" claim. It has resulted in huge sales tax increases and fees tacked on everywhere; as well as special assessments.

Even though I pay $6,300 more per year in taxes, I don't get better services from the county. We share the same street pavement, the same streetlight, the same sewer service. The owners of those houses are raking in rent every month for a collection of paid-off houses with a total annual tax bill that's less that what I pay in a quarter.

This is not only ridiculously unfair, but explains why California has so much trouble paying its bills. The proposition system provides Californians with a way to directly control taxation, but it also gives them a way to directly control spending — and people live to pass propositions to spend money on pet projects without a thought as to how they'll be paid for. They want more and more government services, but don't want to pay for them; even going so far as to restrict the legislature's ability to generate the revenue to pay for what they voted for.

If the tax burden of these eight houses was split equitably, we'd all pay $3700 a year. For most people, that would be a marginal increase, for me it would be a huge reduction. And for the landlords across the street it would be $240 a month less of a profit. I don't think I'd cry too much for them.

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