In an article published on Bloomberg.com, David Crane, president of Govern for California, argues that California Governor Jerry Brown should instigate the repeal of proposition 13, the People’s Initiative to Limit Property Taxation, which was enacted during his first tenure as governor in 1978.
In 2011 Brown said of Proposition 13 that it “started the centralization of power” in the state. As stated here, before Proposition 13, the property tax rate in California averaged slightly less than 3% of market value; there were no limits on increases for the tax rate or on taxes based on the assessed value of property. Some real estate properties were reassessed 50% to 100% in one year.
After Prop 13, property taxes were driven back to 1976 assessed value and property taxes were limited to a maximum of 2% per year as long as the property was not sold. If the property was sold, the property was reassessed at 1% of the sale price.
Crane argues that Prop 13:
… simply shifted revenue collection from localities — which rely on property taxes – to Sacramento, the state capital. Taxation moved from relatively stable property taxes to erratic income taxes and regressive sales levies. By moving to income taxes that treat capital gains as ordinary income, California raises much of its revenue from a boom-or-bust system.
Crane complains that the two tax-reform models being considered by the California legislature from the Commission on the 21st Century Economy and the Think Long Committee for California leave “untouched a significant source of stable revenue and fail(s) to tax real estate, California’s biggest industry, which, because of the state’s climate and other advantages, would still attract capital, even with higher property taxes.”
The author acknowledges that oil and gas companies, commercial-property owners and government employees would oppose repeal, but those guys in the black hats would be opposed by the good guys, including
environmentalists who favor taxes on fossil fuels, local governments and school districts desperate for more control over their affairs, education reformers who support decentralization, anti-poverty advocates keen to shield welfare and other government aid from being siphoned off for pensions and health-care costs, businesses and taxpayers attracted by lower sales- and income-tax rates, and good-government groups in favor of more local control.
Crane actually lauds Brown as a “great politician,” praising him for starting to “move government closer to the people by devolving some functions from the state to local governments.”
Can you say jail inmates?
Crane conveniently ignores that Brown started California down the road toward bankruptcy when he allowed public employee unions to engage in collective bargaining in his first time as governor.
Crane concludes by writing, “I worry that Brown wants to run for president before the next California budget crisis rears its ugly head.”