Editor’s Pick
JUNE 22, 2009 1:38PM

Republicans Shed Crocodile Tears Over the Effect of Prop 13

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croctears 

Republican crocodile tears flowed this weekend in Orange County as a group of city officials called F.I.S.T. – “Fight Insane State Theft” – comprised of 14 Orange County mayors and 42 city council members, nearly all of them Republicans - protested Republican Governor Schwarzenegger's plan to take away billions in state property tax revenue from their cities.

According to the Orange County Register, the group held a rally this past weekend in Placentia, joined by an array of Republican front organizations posing as anti-tax crusaders, including Citizens for a Better Placentia, Fullerton Association of Concerned Taxpayers, and Yorba Linda Residents for Responsible Representation.

The Register notes that the protesters are “particularly concerned about losing funds for roads and other transportation projects.”

But it is the Republicans themselves – and their corporate funded anti-tax allies – who are themselves directly responsible for giving the state the power to take away property tax revenue from California cities.

Prior to 1978, local governments in California (as elsewhere in the nation) could set their own property tax rates and spend the money that they raised on local needs.

But the Republicans did not trust local governments or local voters with the power to tax local property or to spend that revenue as they thought appropriate.

So they decided to give the state the sole power to set property taxes and to give the state legislature the sole power to decide how that money would be spent.

Prop 13 took away the cities' power to set property tax rates or levy property taxes, and gave all such power to the state -- where it would be subject to Prop 13’s strict limits and the 2/3 rule – in other words, subject to the statewide anti-tax minority’s veto, regardless of the wishes or needs of local officials or voters.

Now our local Republican elected officials and Republican anti-tax front groups are outraged about “losing funds for roads and other transportation projects”  -- which, by the way, tend to benefit large landowners and developers more than local citizens -- because the state wants to spend that money elsewhere.

This latest instance of Orange County Republican hypocrisy reminds me of an exchange from Samuel Beckett’s play Waiting for Godot:

Estragon: We've no rights any more?
Laugh of Vladimir, stifled as before, less the smile.
Vladimir: You'd make me laugh if it wasn't prohibited.
Estragon: We've lost our rights?
Vladimir: (distinctly). We got rid of them.

So I ask our Orange County Republicans: Having given up our rights, are you now ready to amend Prop 13 to return the property tax power to local governments and local voters?

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But you see, they didn't cause the problem. That's what they think, and too many people actually believe it...

Here, they did something similar with the city property taxes. There is an absolute cap. Result: It takes cops hours sometimes to respond to calls. Fireman are being let go. The water park that kept the kids busy closed for good years ago and the (republican) businesses are fuming because of the number of kids running through town vandalizing things.

The republican solution? You may not believe it but they are yelling that the city 'must learn to live within its means' and they are behind yet another budget cut and slashing taxes yet again! Yeah, they tax base is so low already that the city is practically dead and gosh, if they shuffled around those few extra bucks the city would spring to life and everything would be just Mayberry RFD.

What they are smoking, drinking, sniffing, huffing or popping should be illegal. Evidently you can't squeeze blood from a stone, or tax money from a libertarian runaway capitalist pig republican...

Would America be that much better being the newest third world country?

HDNet Reports had a show on a few weeks ago that detailed a small town on the rocks. The republican businesses wouldn't put up an extra dollar per employee per year to help those that couldn't find work as I remember the spot. One dollar per employee per year! They had owner after owner bitching about the 'added cost' and how 'it will kill us' and yet the area they operated in had souring unemployment. Talk about not seeing things for what they are... I was just flabbergasted... Arguing with those people would be like a Monty Python skit...
crocodile tears...yes....unlike the real tears being shed by those looking at the state's education funding and social services for the homeless funding and mental health funding....good grief.
Your Prop 13 spawned other Republican inspired idiocies, such as our "TABOR" amendment (Taxpayer Bill Of Rights) which ties the hands of the State govt on taxing. Because of insipid clauses in that amendment, we cant keep anything in the kitty for rainy days, nor can taxes grow to meet new challenges without a vote of the people.
Why people continue to think Republicans can do anything for better governance when they continue to spout claptrap like "The 9 worst words are 'Im from the government and Im here to help'" is beyond me. Life in the USofA is becoming service to The Corporation and F##k everything else.
You are absolutely correct on all counts. And having been raised in the OC and still working here (although I live in LA county now) I've seen that the predominant meme is "gimme everything I want, but I don't want to be taxed for any of it!" yet, things still need to be paid for. They end up shooting themselves in the philosophical foot every time. Sure their city taxes are lower, but they pay outrageous HOA dues (some people have up to three different ones to pay) that often outweigh what they would have paid in taxes. It's all ridiculous.

Repeal prop 8, reduce the budget voting threshold to 50% and let's start fixing this craphole of a state budget. We honestly need a constitutional convention to overhaul the whole thing (and let's get rid of voter initiatives in the process - they just lock up more state budget costs in bonds and percentage allocations to expenses whether they need them or not.)
California is a state in free fall right now. They very well may need to have a constitutional convention to straighten out their system. But as a people they may not be up to the challenge.
Quite frankly, the repeal of Prop 13 and transfer of property tax revenues to municipalities would make sense in California. That's pretty typical of the way it's done elsewhere in the U.S. But (and that's the key word), this would also mean that state funding for schools would justifiably be slashed with most state funding going to the poorest districts without the ability to adequetely fund education via property tax. Most jurisdictions require about a 60/40 minimum ratio of business/industrial/commercial property to residential for viable school funding.
Anyway, I'd love to see this happen. I'd love to see the revenue stay "at home" and be used at home where more accountability can be exercised. If that were to occur, it would also be of benefit to jurisdictions for council and supervisor seats to be by district rather than at large.
Thought provoking post Michael.
Fiscal conservativism is a long-touted "ideal" of the Republican party that I'm not sure has actually ever been implemented anywhere.

On a national level, Reagan and both Bush's engaged in massive deficit spending (as Obama is doing). This makes people happy because essentially it's like living off someone else's credit cards (the next generations). Thus it creates the "illusion" of prosperity, which makes people happy now, but just creates a longer problem in the long run.

Ironically, Clinton (who Republicans would say was a tax and spend liberal) actually was the most fiscally conservative president we've had in a few decades.
I'm with Stellaa--repeal the Republicans and libertarians. I want some basic services, and I'm willing to pay for them. Decimating public education is an incredibly stupid way to cut our state off at the knees.

But hey, that's the California Republican for you. They'd rather die than pay. Prop 13 has been a disaster for this state.
I lived in CA when Prop. 13 was passed, and agree with you on all your points.

Two questions: won't it take an impossible 2/3 "majority" to amend/overturn this zombie? How the hell is that gonna happen?

I think your case could be made even stronger by addding an explanation of the "Warren Buffett situation" [he always notes (with disapproval) that because of Prop. 13, his manse in LaJolla requires far less in property taxes than his much more modest home in Omaha NE.]

This happens because of the limits on property tax INCREASES for those who remain in their homes, vs. the humongous jump that occurs when one sells [i.e., the new buyer gets hit].

As I recall, all of this was a response to the wailings of greedy geezers who maintained that they were being "taxed out of their homes" because of sky-rocketing property values. No one ever bothered to point out that the house-rich geezers could take out a reverse mortgage to pay their taxes. Oh no, that would reduce the equity in the home they wanted to pass on to their heirs.

I remember all of the dire warnings that occurred when this monstrosity passed. I've left the state, but I've watched other states flirt with this gasoline. [MD in particular.]

I feel sad for CA, but I don't know how they're going to get themselves out of this, since power rests with the Crazy Minority, and Reagan's ideas that "taxes only benefit welfare queens" continue to rule.
Ouch! the Irony... it stings! Yikes! Ai yai yaiiiii....
Great analysis, Michael. One additional point: Prop 13 also took away power allocated to local voters and centralized it in Sacramento where larger business interests could exert greater direct influence. Local governments are more likely to be under scrutiny from local voters, and while money and business interests will always have some influence, at the end of the day the voters are the only ones with political clout. Or, at least that's the way it used to be.

When Los Angeles was fighting off the secession of Hollywood and the valley, they pulled a similar stunt: they revised the city charter so that neighborhood councils would be formed. Rather than having voting power rest with registered voters (and registered voters must be residents), these councils allow voting membership from a number of non-residents -- and while it was set up to appear harmless enough, this took away what little political clout residents could have enjoyed and handed it over to a council that would also include representatives from commercial interests and "faith-based" institutions. In fact, there were actual seats on the council reserved for "faith-based" candidates. I could theoretically attend a service in a storefront church anywhere in Los Angeles and claim the right to vote and belong to the neighborhood council in that district. I doubt this was
sorry, screen froze up in mid-comment.

My point was, you have to be wary of any of these "reforms" which, like Prop 13, dilute control over the purse strings and in reality make it easier for business interests to have their way.
Love the quote from Godot! So very fitting. Thanks for the read.
There's lots of bad things that can be said about Republicans, from sanctioning torture to allowing Wall Street to destroy the financial system while lining their pockets.

But this article is a total crock. In fact the blame for Prop 13 lies with the Democrats and a bit history. In the 70's housing prices in CA were booming (sound familiar?), rising an average of 15-20% a year. This doubling every 3 or 4 years was pleasant for speculators and sellers, but no so for folks that simply wanted to stay in their homes. Since property taxes were a fixed percentage of home value, their property taxes were rising at the same rate as their home value. Not so good for retirees or even the average salaried schlub who's income was nowhere near keeping pace. The Democrats controlled the Legislature, but refused pleas to cap increases in property taxes.

So the lunatic right which had always been trying to get rid of taxes all of a sudden found the public willing to sign on to their prop 13. The Democrat leadership bet the proposition would lose. They were wrong.

To try to say the Republican party did this is a sheer fabrication; they may have supported Prop 13 but had no power to impose it. The groundswell that passed it came from average voters worried about being taxed out of their houses, and a Democratic legislature that refused to listen.
Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed One percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

This is true democracy designed to keep investment within the community and within California. The net purpose was to provide state level controls to limit local corruption. It is the reason why homes have high values and real estate has been one of the biggest industries in the state.

The California economy benefitted from Reagan's "defense" spending in the 80's, The technology bubble in the 90's, cheap capital for real estate up to 2006 and all the 1% tax resets from these transactions. This made for very fat and happy government and generous pension benefits.

Messing with Prop 13 is killing the Golden Goose of the Golden State. The problem is not productive communities keeping thier 1%. The problem is a wasteful and corrupt central government that confiscates 10% of income on top of the annual 1% of home values .

The move to repeal Prop 13 will decrease the investment value of California real estate and accellerate the decline to a deeper bottom.

I write this now because the owner of the company I work for is selling his $1,250,000 Orange County home at a loss and moving his multi million dollar surgical technology business to Florida along with several executive jobs and fanilies with school age children.

Florida has hurricanes humidity and bugs. However, 0% income tax, $20 automobile registration, cheaper fuel and energy makes for an attractive business environment. The Florida State employee pension fund is a personal 401(k) just like people who pay their salaries.

I suggest Mr Fox report on California's real budget conflict by reviewing the link below

http://www.californiapensionreform.com/calpers/

P.S. His last quarterly California State income tax payment was more than I make in a year as a full time bookkeeper
I was on a rural Fire Department Board when Prop 13 passed. If the State hadn’t bailed us out we would not have had enough money to pay for Liability insurance, Workers Comp insurance, nor be able to obtain the equipment.

Proposition 13 was a meat ax approach to a real problem at the time. Real estate taxes were skyrocketing as counties struggled to keep up with demands. For those on a fixed income it was creating a problem as taxes could increase well over five times in just a few years.

One solution which would have given an even greater reduction in taxes would have been for the State to take over the financing of local courts, welfare systems and schools for which many programs were then and even now pretty much mandated and not controlled by local governments.

My main argument opposing Proposition 13 at the time was that we were giving away local autonomy for local Government as the only way the Counties could survive was to go hat in hand to the State Government and that would surely mean the State would set conditions for the money. Indeed that has not only happened but in addition now that the state is in such bad shape they are not taking back from the Counties in as much as they say we are no longer bailing you out.

There was little doubt we needed tax relief at that time but the State Legislature couldn’t agree on how to do so, hence we got Proposition 13.

One other thing that should be said, Prop 13 was pushed by Conservatives who believed that to make a smaller government you cut of the funding, “starve the beast” was the term. This has been a Conservative mantra for decades in California. The California Republican party used to be somewhat moderate centrist prior to the mid 70’s when the Flat Earth Right Wing began their takeover of the Party. This was the beginning of the Conservative revolution and now we see just how affective this has become. Now we see the results and as always said, “So goes California, so goes the nation”. This is a shot across the bow for those states who have flirted with the “California Revolt” of tax cuts and little plane for that rainy day. This is what you will reap, and it is not so much a “rainy day” here but a full blown monsoon.

Worse the Republicans proposals are to continue more tax cuts and cuts in services to balance the budget. The Democrats are far from blameless but at their best the Republicans make the Democrats look good.
Badgolfer,
You point out something that is true, it was the Democrats who could agree on how to restructure the distribution of taxes in the 70’s, but it was also the special interests who were pulling so many different directions which made the problem worse. So a solution was made for them and it was a bad one that would sometime in the future come back to haunt each of those special interest from coming to a consensus.

Vera Capto,
“Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed One percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.”

Yes this is true on the way it is structured but the stickler here is “apportioned according to law to the districts within the counties”. Here again I will give our small rural fire district as an example at that time. That law of course meant that you were allocated the proportion of your tax rate for what the county collected in taxes.

So, if you were a one of the communities which had a Rec district, Fire District and more special districts than your community received from the county the portion of taxes collected from the entire county. If you were a rural district with only a Fire District and let’s say you were already struggling with a tax rate that was not able to keep pace with your increase in costs with a high tax rate you received a funding in equal proportion to what your tax rate was.

Example, our tax rate was set by a former board which was made up of old large land owners (none under 70 years of age) As they had an issue with any taxes they set a tax rate of 35 cents per thousand of valuation. This did not meet the needs of this all volunteer fire department. We had to continue to hold fund raisers just to replace turnout. The comment by one board member was if you wanted to be fireman you should raise those funds yourself.

Now 25 mile from the edge of our district was a community, not a wealthy community but on the highs side of Middle class. They had several special service districts. These districts amounted to a combined tax rate over $7 per thousand.

I can’t recall the entire rate the county collected after Prop 13 but let us say it was $10 per thousand. Now you take each special service district and factor in the percentage they were receiving of the entire county assessments, then each district would receive that percentage of what he county collected. Not the former percentage of what the special districts former tax rate, but what the county as a whole received. So that community which had multiple special districts would receive the bulk of the tax money, districts such as our fire district receive next to nothing. We were bad off before and now we were far worse.

Now, the State comes to the rescue of the Counties recognizing the potential disaster about to happen. The say they will bail you out, but with conditions. Such is what has happened every year since Prop 13. But this year the State hasn’t the funds to bail out the counties.
badgolfer: While I don’t think you’ve made a case against my observation of Republican hypocrisy about the effect of Prop 13 on the control that local cities and local voters have on property tax revenue, I completely agree with your main historical point – that rising California property values in the late 1960s and 1970s resulted in skyrocketing property taxes and that neither the Democrats or the Republicans did anything to adequately address the catastrophic impact of these rising property taxes on middle class homeowners (and especially seniors and those on fixed incomes).

As a result, Howard Jarvis and the large apartment owners were able to convince the voters that Prop 13 -- capping all property taxes and centralizing their collection in Sacramento -- was in the interests of everyone.

At first, both the Democrats and the Republicans (including Governor Reagan) opposed Prop 13, believing that it would lead to financial disaster for the state. Then Reagan and the Republicans got onboard – and rode Prop 13 all the way to the White House.

As you note, the failure of the Democrats to offer an alternative plan for property tax relief for the middle class was – and remains – a stunning political miscalculation and an extremely costly failure of California’s Democratic leadership.

But that does not change the fact that Reagan was right – initially – about Prop 13’s disastrous effect on the state’s budget, costing the state hundreds of billions of dollars since its passage.

Nor does it change the fact that by strictly capping taxes on all property – including commercial property – Prop 13 has benefited large commercial landowners far more than middle class homeowners.

Rather, middle class homeowners in California have seen their other taxes and state fees (income taxes, sales taxes, gasoline taxes, vehicle taxes, Mello-Roos, college tuition, road tolls) rise as a direct result of Prop 13’s windfall for large landowners, wiping out any real tax savings for the middle class homeowners that Prop 13 was ostensibly meant to protect.
Vera: Californians want police protection, but do not want to pay for police. They want fire protection, but don't want to pay for firefighters. They want roads, but they don't want to pay the people who build and maintain them. They want schools, but don't want to pay for teachers. They want prisons (they really, really want prisons), but they don't want to pay for prison guards.

Public employee pensions in California are high because our Republican officials (and voters) want services, but do not want to pay the salaries of the people necessary to keep and maintain these services.

Instead, they agree to pay public employees in the form of increased pensions -- which, they hope, won't become due until they're out of office.
stella, doesn't that also mean that you were (unintentionally of course) screwing the county you lived in, since your property taxes have been kept artificially low by prop 13? this is close to what maui mom is saying in her comment too.

i'm not trying to be antagonistic, i also live in california, and prop 13 boggles my mind. it costs money to run the state. why isn't there more talk of repealing some of these legal fixtures?
In the article you write "But it is the Republicans themselves – and their corporate funded anti-tax allies – who are themselves directly responsible for giving the state the power to take away property tax revenue from California cities."

Any reasonable interpretation of this means that the *Republicans* chose to take tax power away from local gov't, give it to the state, and cap the rate. And then imposed their decision on CA.

This is fantasy, as you more or less concede in your later reply. Right-wing fanatics who had been trying for years to do this had their stars align with leaping home prices causing fear in the public. It was a failure of elected leadership to present a reasonable alternative that fueled passage of Prop 13. Republicans decided NOTHING.

So are Republicans hypocrites? Sure. Responsible for many of our problems on a state level (by blocking tax increases, among other things)? Sure.

But did they decide to impose Prop 13? No way. Blame for passage of that crippling measure goes to the Democratic leadership.
badgolfer: Prop 13 passed because the state's Republicans adopted (and co-opted) the anti-tax, anti-government ideas of the people you call "right-wing fanatics," despite their concern that it would bust the state's budget and financially ruin the state. The Republicans soon got over their concern for fiscal responsibility (remember when Republicans were cautious about government deficits even when they were in power?) and haven't looked back -- and they've been living off the political force of Prop 13 and its progeny ever since.
no, i am not ready to give up prop 13. i am instead ready to give up pay raises for state legislatures. i am ready to release from prisons all non violent prisoners. i am ready to close half to three quarters of the prisons. i am ready to fire half the prison guards. i am ready to throw their union contract in the trash. i am ready to turn welfare over to the IRS. i am ready to force the California government to live within it's and our means. they don't spend money like it is water, they spend it like it is a river.
on the yes side, the property tax money should go to the counties again, to spend as they see fit. if the state government can not live on just state income tax's and fees, then it should go bankrupt and start over again.
Michael Fox writes "At first, both the Democrats and the Republicans (including Governor Reagan) opposed Prop 13, believing that it would lead to financial disaster for the state. Then Reagan and the Republicans got onboard – and rode Prop 13 all the way to the White House."

Reagan served as governor from 1967-1975. Prop 13 passed in June 1978.
badgolf: Although Reagan was not governor when Prop 13 passed, his support for it was essential -- both to its passage and to Reagan's path to the White House.
Thanks to all who read, commented and rated!

Thanks for the lively discussion!

Thanks to the editor for the pick!