Tax Revolt! California’s Proposition 13

Frank Murphy — September 23, 2010
I wanted to follow up on a point Ron made in a comment on the post How Much Freight Can Average Taxpayer Pay. He issued the challenge: “Perhaps we could begin with some suggestions about specifically which budget items might be cut.”

It occurred to me that the greater challenge might be to identify where best to spend, what areas are underfunded — hidden false economies like neglected maintenance that will bite us down the road.

Those interested in municipal taxation issues will want to look at California’s experience after its tax-revolt Proposition 13 that rolled back property taxes, capped them at 1 percent of purchase price, and limited yearly increases to 2 percent. Basing municipal taxation on property market value assessments has all kinds of problems but a lot of people think that Proposition 13 resulted in the disaster that is current California with entire counties declaring bankruptcy.

Here’s an interesting discussion on KPBS public radio San Diego.

A bit that stood out: best funded schools in the US: New Jersey. worst funded schools in the US: California. Highest municipal taxes: New Jersey. Lowest municipal taxes: California.

It might help to clarify if the topic for discussion here is along tax revolt lines or a discussion about the City’s spending decisions — right, wrong and neutral — and how it raises its funds.

If the discussion included property based market value assessments I think it would be interesting to look at alternatives. I might have more or less house than the next guy and I might use more or less costly City infrastructure but my share of paying for it all is based on the value of my property… inherent inequities there don’t you think? The California revolt if I understand it right was opposition to citizens tax levels rising dramatically simply because they had stayed in the same house for decades and had no desire to move. The value on paper of their property was penalizing them and even driving people out of their homes because they couldn’t afford the property taxes. Windfall on the property sure but they’d have to leave that market as well, wouldn’t they — or become renters I suppose.

Also, belonging in the discussion at some point is the provincial government program allowing home owners to defer property taxes. The 55+ program has been in place for a number of years but this year they introduced a new one which I thought was kind of innovative. Families with children 18 or under now qualify. The tax owing is cumulative but at a very low interest rate. It’s repaid by the estate or when the house is sold.