Public Sector Unions’ $9 Billion, Two-Stage Attack on Prop 13

It was only a matter of time until California’s powerful public sector unions geared up for a two-step approach to overturn the 1978 Proposition 13 ballot measure that has saved California property owners about $550 billion in property taxes.

Rather than taking on homeowners directly, unions are preparing a $9 billion “split roll ballot initiative” that will initially jack-up rates on non-residential owners. If successful, unions can later file an off-year initiative to raise residential property taxes in a low-turnout off-year election.

Until Prop 13, outrageous government-sponsored inflation caused property tax bills to skyrocket, taxing seniors out of their homes in the 1960s and 1970s. After Jerry Brown became governor in 1975 and threatened to raise the property tax rate dramatically, Californians became the tip-of-the-spear in a national taxpayer revolt by passing Prop 13. The measure limited taxes to 1% of original assessed value and a 2% maximum growth.

Prop 13 passed because it created a virtuous coalition of apartment owners willing to contribute lots of cash and individual home owners enthusiastic to organize their neighborhoods into soldiers to fight property tax increases.

The measure has saved California taxpayers about $550 billion since 1978, according to Jon Coupal, President of the Howard Jarvis Taxpayers’ Association. For almost 40 years, it has been the “third rail” of California politics: “Mess with it, and die.”

But a public sector union coalition led by the California Teachers Association, California Federation of Teachers, the SEIU and their fellow travelers under the slogan “Make It Fair” is proposing a $9 billion a year “split roll” property tax rate increase on commercial, industrial, agricultural and rental property owners, while exempting home owners.

If the unions pass this year’s split roll tax increase, they know apartment owners who have written the big checks to protect Prop 13 in the past will not fund a battle to just protect individuals from residential property tax increases.

The average American today essentially works for the government until April 21 each year to pay for approximately $3 trillion in federal and $1.5 trillion in state taxes. That equals the first 111 days of the year and 30.2 percent of the nation’s entire income.

One of the most contentious slurps at the public trough is property tax rates, which vary from less than 1 percent to as high as 4.6 percent. Many towns and counties also levy addition real estate taxes. The average property tax payment in the U.S. is about $2,089 per parcel per year, but it varies from a few hundred dollars in the South to a whopping $6,579 in New Jersey, according to WalletHub.

About $15 billion worth of homes are foreclosed on each year because of property tax delinquencies, according to a 2012 study by the National Tax Lien Association.

Comparing politically “blue” Democrat states to “red” Republican states, property tax rates in Democrat states averages at the 62nd percentile of all states, and Republican states average at the bottom 40th percentile level for all states, according to WalletHub. But Democrat states would have averaged 20 percent higher, if Prop 13 had not restricted the growth of property taxes in California to the 17thlowest state in the nation.

Despite already having the highest total tax burden of any state, Gov. Jerry Brown in 2012 convinced voters to pass Proposition 30, which raised the top income and sales tax rates in California to far higher than any other state in the nation. Since that tax increase, hundreds of large companies have left California, including Waste Connection, Comcast and Campbell’s Soup.

California’s budget has been rescued by the stock market capital gains taxes generated from new initial public offerings in Silicon Valley’s social media and high tech boom. But when Intel decided to spend $8 billion on a new semiconductor plant, the company built it in Oregon.

The negative economic by-product of the Democrat-controlled California legislature’s tax-and-spend policies is that 23.4 percent, or 8.9 million, of the state’s 38 million residents now live in poverty, according to a new Census Bureau report.

The good political news for unions is that this economic failure has created a built-in coalition to support taxing businesses and the supposedly rich. The unions hope that coalition consigns Proposition 13 to what Karl Marx called “The Dustbin of History.


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