Prop. 13 Redux

by Dennis Green

Well, the usual suspects are at it again. The usual swine at the public trough are saying we should revisit Prop. 13, the Jarvis Amendment to the State of California Constitution, which limits the amount property taxes can increase. They say that it is the main reason the schools, those sacred little cows, are so starved for funds. In a nation of sheep, only the cows are king.

What they don’t comprehend is that in such a downer of an economy, which is only going to get worse, there’s also a taxpayer revolt already underway that will make Jarvis and Gann look like pikers. So if we do revisit Prop. 13, we’re just liable to make it stronger, tighter, more impervious to gaming by parcel taxes that let seniors vote, but exempt them from paying for the taxes they approve.

These Altered States of America — with the Tea Parties and town hall meetings and major skepticism — do not bode well for the little piggies going to market on our dime. Let’s examine the State of California’s current tax policies:

1) California imposes America’s fourth highest top marginal tax rate, behind only Hawaii, Oregon and New Jersey.

2) California’s progressive tax rate on more productive, higher earners, is the nation’s third steepest.

3) Our corporate income tax is the country’s eighth highest.

4) Our sales tax is the highest in America.

5) Even with Prop. 13, there are 16 states with lower property taxes than California.

All of these facts make our state far less competitive in attracting new business than nearby states Nevada and Utah, which impose much lower taxes overall.

It is also true that we bear a much greater burden than most Americans do in taxes, with questionable services in return. Schools are going broke, higher education is becoming priced out of reach, and venture capitalists — once the primary source of funding for Silicon Valley — are lying low. What’s going on?

Well, to begin with, public payrolls are still bloated from formerly more prosperous times. Rampant immigration to California and out-of-control development growth fed an inflation in real estate prices that State, County and local governments came to depend on. But now, with 35% of California mortgages “underwater” and many thousands of foreclosures underway in residential real estate, the boom has turned to bust. Just wait until the commercial real estate bubble also bursts!

None of these levels of government have reacted quickly enough with the sort of downsizing that any private sector corporation would exercise. Only now are school districts beginning to respond with drastic cuts in funding, always backed up by a promise to raise parcel taxes to get around Prop. 13. Or is that a threat?

Only the bravest politicians and public figures, however, will own up. Far too many will go on making the same kinds of hollow, empty promises of future prosperity that they’ve been making for the past forty years, ever since the California real estate boom times began. Don’t believe them, and don’t vote for them. Time for us all to get real.

©2010 Dennis Green