by Richard Rider, Chairman, San Diego Tax Fighters
Updated 1 July, 2012
Phone: 858-530-3027
Blog: www.RiderBlog.Not.Long.com
When it comes to gathering sufficient property taxes, Prop 13 is no problem at all – except for profligate spenders. Look at the history of my San Diego County – a history which pretty much reflects the history of property taxes in the urban/suburban counties that hold over 85% of California's population.
According to the SD County Tax Assessor, in 1977 – the year BEFORE Prop 13 took effect (when everything was working great, according to Prop 13 critics) – our countywide property tax revenue was about $639 million. In the 2011-2012 fiscal year, our county assessor reported real estate property tax revenues of $4.550 BILLION. For every property tax dollar collected in 1977, the county in 2011-12 collected $7.12.
During that time frame, our county population has grown about 85%, and inflation has gone up about 253%. Hence property tax revenues today are substantially higher than the bloated PRE-Prop 13 year, even after adjusting for inflation and population growth.
California in 2009 ranked 15th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But CA property taxes per owner-occupied home were the 10th highest in the nation in 2009.
http://www.taxfoundation.org/taxdata/show/251.html and http://www.taxfoundation.org/taxdata/show/1913.html (2009 latest year available)
To see how CA ranks numerically against the other states on tax, regulation, litigation and other economic factors (with confirming URL’s), go to: http://open.salon.com/blog/richard_rider and read the latest updated version of my dreary fact sheet “Breaking Bad – CA vs. the other states.”
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It turns out that, under Prop 13, property tax revenue is FAR more stable than our other forms of tax revenue. Since the start of the recession, income tax revenue has plunged, and sales tax revenue has tumbled.
But property tax revenue seldom goes down AT ALL. Since the year Prop 13 passed in 1978, San Diego County real estate property tax revenue has ALWAYS gone up – every year – until the 2009-10 fiscal year, when it dropped (drum roll) 1.0%. In 2011 property tax revenue slipped another 1.2%, but this 2011-12 year it’s up 1.1%.
This in the 6th year of California’s real estate meltdown! In 2008-09, real estate property tax revenue was actually up 4.1%. Not one person in a thousand knows about this revenue stability – the press has not covered these amazing facts.
Revenue is up because Prop 13 has the little-known added benefit of smoothing out real estate property tax revenue from year to year. Most properties this past year (generally those purchased prior to 2003) had their property tax go up 2%. Add to that the property resales, property improvements and new structures (all of which establish new tax assessment levels), and the revenue stayed rather constant in the teeth of our economic downturn.
Consider what happens without Prop 13 protection: In the real estate boom years from 1998 through 2005, property taxes would have SOARED. Even WITH the Prop 13 limitations, San Diego County property tax revenue collection during this period STILL rose 111%. But then in the last four years, dropping property values would have caused a dramatic plummet in property tax revenues – revenues that governments would now be hooked on – just like we see with our volatile sales taxes, and especially with our hugely erratic income tax revenues. Property tax revenues are governments one reliable source of income, thanks to Prop 13.
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“Cut and Paste” arguments rebutting Prop 13 attackers
For 30 years since the passage of Prop 13, advocates for higher taxes have complained about inadequate CA property tax revenue. But the one thing ALL such critics have in common is that they NEVER show the actual revenue shortfall. They never provide the figures.
They never compare the property tax revenue collected in 1977 (the year before the big Prop 13 drop when everything was supposedly hunky dory) with the property tax revenue being collected today.
Why? For one of two reasons. And ONLY one.
1. They don't know the figures. Never checked. Even supposed financial gurus haven't a clue what the numbers are. They just INTUITIVELY know that the revenues are woefully inadequate. After all, this “massive revenue shortfall” has been endlessly cited by fellow leading California “progressives” for decades, so most liberals mindlessly conclude that it MUST be true.
2. They DO know the figures. But they intentionally omit them, as such figures DESTROY their argument. For it turns out – compared to property tax revenue collected the year BEFORE Prop 13 passed – such tax revenues have grown faster than inflation and population COMBINED.
Much of the complaining about Prop 13 has to do with its “unfairness.” Property is taxed by a formula that caps the yearly tax increases, resulting over time in long-time property holders paying less property tax than newer purchasers of similarly valued property. But is “fairness” the issue? I think not.
We could have this discussion if the idea was to “equalize” the property taxes in a revenue neutral fashion (though I still disagree with the change). But the whiners’ goal is to make the senior property owners pay MORE property taxes – with little or no relief for the new property purchasers. Obviously this “fairness” objection is just a ruse to further raise property taxes – and, as I’ve demonstrated above, Californians pay quite enough property taxes, thank you very much.
As to commercial property which “turns over” less often than residential property, a discussion of raising property taxes faster needs to include consideration of our already high corporate income tax – highest west of the Mississippi (except for Alaska) – our economic competitors.
Our state’s businesses are viewed as ATM machines by our greedy California state and local governments. Raising commercial property taxes faster would only accelerate the business rush out of the state.
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A perfect example of what would happen in California without a two-thirds rule on taxes, budget
If you want to see how this simple majority system would work, read SAN DIEGO UNION-TRIBUNE’s editorial writer Chris Reed's blog (printed below) describing our liberal sister state -- New York.
NY state has only a simple majority vote requirement for taxes and budgets. This past year the state raised all sorts of taxes (too often with 51%-49% votes) -- while increasing the state budget 8%.
http://weblog.signonsandiego.com/weblogs/afb/archives/034073.html
Imagine there was another high-tax large state with a majority Democratic Legislature in which heavily gerrymandered election districts kept incumbents in power no matter how poorly the state was run and where the gerrymander ensured disproportionate influence for public employee unions. This state, like California, also had highly volatile revenue because of a reliance on income and capital gains taxes and a habit of spending the windfall in boom years. In this state, however, unlike California, taxes and budgets could be approved on a simple majority vote.
You don't have to imagine this state. It's real. It's New York. And guess how N.Y. lawmakers dealt with their budget crisis for their 2009-10 fiscal year, which started April 1?
They increased spending by $10 billion! By 8 percent! How did they fund this? Partly with federal aid, but mostly with $8.3 billion from two dozen increases in taxes, fees, surcharges and assessments.
Income taxes were raised on the rich.
A popular state program providing rebates of $200 to $900 to homeowners on their school property taxes was eliminated.
An extra 1 percent tax was added on utility bills.
New taxes were imposed on HMOs and health and auto insurance.
The fee the state charges retailers to sell tobacco was increased by ten-fold or more, depending on the size of the business.
The excise tax on beer and wine went from 11 cents to 14 cents per gallon.
A 5-cent-per-bottle deposit was put on plastic water bottles.
Fees to register cars and boats and to get a driver's, hunting or fishing license all went up.
There are more, but the point is obvious. Taxes and taxes disguised as fees were raised with reckless zest -- even in the middle of a deep recession. Even as state unemployment soared. Even as budget analysts decried gimmicks, unaddressed structural problems and such outrages as including $170 million for lawmakers' pork earmarks.
But what a minute -- didn't Gov. David Paterson describe the budget as a tough spending plan that made difficult choices and required "shared sacrifice"? Sure he did. That's why he announced plans for 8,500 layoffs in March. How many state employees has he actually laid off nearly three months later? Zero.
Here's the analysis of George J. Marlin, a veteran New York journalist and author of two books about the state's politics:
The governor's claim that there is "shared sacrifice" is ludicrous. While public employees in California, Ohio, Vermont, Delaware and other states are accepting wage cuts, raise freezes and furloughs, no such sacrifices are being made by New York state employees. Paterson not only gave large raises to his staff, there's a $145 million reserve in the budget to pay retroactive salary increases to unionized workers negotiating contracts with the state. Medicaid - which funds the health care unions and costs more per capita than the combined expenditures of America's three largest states, California, Texas and Florida - is slated to grow 7 percent to $48 billion, a $3 billion increase. Most state employees and their departments are not affected by this fiscal crisis. In fact, most will see increased spending.
And THIS is what "good government" groups want California to become by eliminating the two-thirds hurdle on tax hikes and budget approval? That's truly, utterly, completely mind-boggling.
Thank God for the two-thirds majority vote rule. Or thank Buddha. Or Oprah. Or Kobe. Whomever you worship. The two-thirds rule is the thin blue line protecting California from ruination.
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