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The Enduring Proposition 13 « Back to Story
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How about a little more "tax control" by the people in the form of a "California salary board" that would have five elected officers elected directly by the citizens of California. This board would set ALL the salaries of ALL the employee's of the state including the governor and the legislature and would sit at the table with public unions to represent the taxpayers. The board members would be elected every 2 years. Maybe then the legislature would get the message about how taxpayers think about spending!!!
Rent control is government theft of property owners' assets to benefit tenants. Prop 13 is a LIMITATION on taxes, imposed by the citizens on their own government.
Taxation is backed by force. If I take your money by force to give to others (including myself) that is clearly theft. When a majority uses government to do the same thing, it's still theft -- it's just legal theft.
The difference between rent control and Prop 13 is that rent control is theft, while Prop 13 limits thefts. To say they are to same is to say that police and robbers are the same.
Breaking Bad: California vs. the Other States
by Richard Rider, Chairman, San Diego Tax Fighters
Revised 16 September, 2011
Updated version online at: www.RiderBlog.NotLong.com
Email: RRider@san.rr.com Phone: 858-530-3027
Facebook blog page: www.Facebook.com/Richard.Rider
Here’s a depressing but documented comparison of California taxes and economic climate with the rest of the states. The news is breaking bad, and getting worse (I keep updating this fact sheet):
California has the 3rd worst state income tax in the nation. 9.3% tax bracket starts at $46,766 for people filing as individuals. 10.3% tax starts at $1,000,000.
Highest state sales tax rate in the nation. 7.25% (as of 1 July – does not include local sales taxes)
http://www.taxfoundation.org/files/bp60.pdf Table #15
California corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. http://www.taxfoundation.org/files/bp59.pdf Table #8 -- we are 8th highest nationwide.
California’s 2011 Business Tax Climate ranks 2nd worst in the nation, close behind New York state.
Fourth highest capital gains tax 9.3% http://www.thereibrain.com/realestate-blog/capital-gains-tax-rates-state-by-state/109/
In virtual tie with CN and NY for highest gasoline tax (averaging 67.5 cents/gallon) in the nation, (July, 2011).
http://www.api.org/statistics/fueltaxes/ (also CA has the highest diesel tax – 76.9 cents/gallon)
California is ranked 14th 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.
California’s 2011 “Tax Freedom Day” (the day the average taxpayer stops working for government and starts working for himself) is the 6th worst date in the nation – up from 28th worst in 1994, but down from 4th worst in 2009. CA “improved” only because of our state’s soaring unemployment rate – the new tax dodge!
California has the 2nd highest state unemployment rate. (August, 2011) – 12.1%. National unemployment rate 9.1%. National unemployment rate not including CA is only 8.69%, making the CA unemployment rate 39.2% higher than the other 49 states. http://www.bls.gov/lau/
California needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average for the states is 92. http://cssrc.us/publications.aspx?id=7707
For the 2007-08 school year, the Los Angeles Unified School District spent $29,780 per student. The district also has the country’s second lowest graduation rate of 40.6%. http://www.calwatchdog.com/2010/08/20/lausd-spends-30k-per-student/
CA public school teachers the highest paid in the nation. CA students rank 48th in math achievement, 49th in reading.
http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx page 36
1 in 5 in Los Angeles County receiving public aid.
California has 12% of the nation’srr population, but 36% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA. http://weblog.signonsandiego.com/weblogs/afb/archives/034662.html
California prison guards highest paid in the nation. http://www.caltax.org/caltaxletter/2008/101708_fraud1.htm
For every dollar California pays to D.C., we get back 78 cents. We rank 7th worst. http://www.taxfoundation.org/research/show/266.html
California is the worst ranked state for tax administration – another anti-business factor.
California now has the lowest bond ratings of any state, edging out Louisiana.
The American Tort Reform Association ranks CA the worst state “judicial hellhole” – extremely anti-business.
America’s top 500 CEO’s rank California “the worst state in which to do business” for the 7th straight year (May, 2011).
http://chiefexecutive.net/best-worst-states-for-business (It’s worth reading the short article, and especially the part about California.)
California, a destitute state, still gives away college education at fire sale prices. Our community college tuition is the lowest in the nation. How low? Nationwide, the average community college tuition is about three times higher than California CC’s.
http://www.hecb.wa.gov/research/issues/documents/TuitionandFees2009-10Report-Final.pdf Chart 5 on page 8
This ridiculously low tuition devalues education to students – resulting in a 30+% drop rate for class completion. In addition, 2/3 of California CC students pay no tuition at all – filling out a simple unverified “hardship” form that exempts them from any tuition payment, or receiving grants and tax credits for their full tuition. http://tinyurl.com/ygqz9ls
On top of that, California offers thousands of absolutely free adult continuing education classes – a sop to the upper middle class. In San Diego, over 1,400 classes for everything from baking pastries to ballroom dancing are offered totally at taxpayer expense. http://www.sdce.edu
Protests about increased UC student fees too often ignore one crucial point -- all poor and most middle class students don't pay the “fees” (our state’s euphemism for tuition). There are no fees for California families with under $80K income. Moreover, Pell Grants and federal tuition tax credits covered the total 2009-10 fee increases for nearly 3/4 of all undergraduates with household incomes below $180K.
California residential electricity costs an average of 32.4% more than the national average (far higher in San Diego County). For industrial use, CA electricity is 70.8% higher than the national average (May, 2011).
It costs 38% more to build solar panels in California than in Tennessee – which is why European corporations have invested $2.3 billion in two Tennessee manufacturing plants to build solar panels for our state.
Consider California’s net domestic migration (migration between states). From April, 2000 through June, 2008 (8 years, 2 months) California has lost a NET1.4 million people. The cumulative net annual income lost from this 8 year out-migration comes to about $26 billion. Net departures slowed in 2008 only because people couldn’t sell their homes. In 2010 we lost “only” 72,000 net people to domestic migration. Again, note that this is NET loss.
http://www.mdp.state.md.us/msdc/Pop_estimate/Estimate_08/table5.pdf and http://tinyurl.com/2010-CA-lost-72000 and http://interactive.taxfoundation.org/migration/
These are not welfare kings and queens departing. They are the young, the educated, the productive, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their pensions provide more bang for the buck. Some of these departing seniors are retired state and local government employees fleeing the state that provides them with their opulent pensions – in order to avoid the high taxes that these same employees pushed so hard through their unions. And once they move out of California, our state can no longer tax their California-paid pensions.
As taxes rise and jobs disappear, we lose our tax base, continuing California’s state and local fiscal death spiral. This downward spiral must stop NOW.
NOTE: To see the latest version of this “Breaking Bad” column, plus other taxpayer items of interest, go to my blog at www.RiderBlog.NotLong.com, or my Facebook page at www.Facebook.com/Richard.Rider. This fact sheet also is available free upon request as a 2 page Word file for printing.
For those of you that think Prop 13 somehow starved state and local government, read my earlier comments here, actual DATA that refutes this nonsense.
For those that think we pay too little taxes in CA, consider my "Breaking Bad" post here.
"First, the old owners paid property taxes for decades. They paid already for the roads, schools and improvements that benefit the new owners. Capping thir tax is hardly unfair: they have already paid--for decades."
C'mon, you can't be serious. Every year, the government incurs new costs. Most of these are for educating the current crop of school children, but there's road maintenance, etc. as well. If someone bought a house in 1996 and had their first kids 5 years later, they are paying much less in taxes than the neighbors who bought in 2007 with no kids.
"Second, eliminate Prop 13 and you'll force out old people who live on fixed incomes. The problem before 13 was just that: and eliminating Prop 13 will bring it back. Oldsters who paid endless taxes will have to sell and move. So its fair to force out old people for transplants from New York? (nothing against NY)."
So how is this argument any different from an argument for rent control? After all, if you don't have rent control, people on fixed income will be forced out of their homes. If someone's house doubles in value, that's a nice problem to have. What about electricity or natural gas? Should they be capped as well because people on fixed income can't afford it?
"Third, Prop 13 benefits new owners, especially now. But now and your tax is capped at a percent of your purchase value-and increases are also capped."
Not really. These new owners pay a lot more than established owners. Also, capping the amounts paid isn't necessarily a good thing if those people consume more than they pay. It just means other taxes will increase.
The best way to control spending is to actually control spending, not try to fiddle with one tax for one group of people.
As for commercial space, one of the things I've read, but I don't know if it is true, is that when you sell a company, the real estate assets that the company owns stay registered in the company name, so their taxes don't reset, but if you sell a residence, the taxes do reset. As far as pushing out smaller stores for larger stores, why is that a problem? Why should real estate be allocated by market principles, where all businesses are taxed in the same manner?
I've lived in California since 1975. My view on Prop 13:
Damning it as "unfair" to new property owners overlooks three key things. First, the old owners paid property taxes for decades. They paid already for the roads, schools and improvements that benefit the new owners. Capping thir tax is hardly unfair: they have already paid--for decades. Second, eliminate Prop 13 and you'll force out old people who live on fixed incomes. The problem before 13 was just that: and eliminating Prop 13 will bring it back. Oldsters who paid endless taxes will have to sell and move. So its fair to force out old people for transplants from New York? (nothing against NY). Third, Prop 13 benefits new owners, especially now. But now and your tax is capped at a percent of your purchase value-and increases are also capped.
The people who say it "only benefits companies" are either gullible or dishonest. We all know who will pay the increased taxes on on business owners if taxes are raised: sending more money to Sacramento won't better things in Los Angeles where I live. And if taxes are increased on commercial space, say good by to all those quaint little shops that everyone likes: they'll be gone and replaced by bigger stores. Or shops will collapse into tinier suites to minimize atx, whihc will limit the types of small stores you can have. Most owners will leave for cheaper space on the city outskirts. Then of course will come the cry for some "action" to keep them.
So who WILL bnefit from a repeal of 13? State employees, who have a new source of income to support their bloated pensions; UC professors who were and may still be able to retire at age 50.
Legislators who have a new source of tax income.
The smaller houses or condos that will result will be a green "anti-family" dream--but families will have to move elsewhere.
The losers? Families, old people, taxpayers, sons and daughters of old people...all the rest of us.
I think there are several flaws with Prop 13. I'm a CT resident, and have not lived in CA so I don't have a dog in this fight, but from what I've read, Prop 13 doesn't seem like a good policy, but my reasons against it aren't the normal reasons.
Prop 13 limits your property taxes to 1% of the value of the property, which is set when you purchase the property. This can rise 2% per year maximum, but then when you sell the property, the value is re-indexed.
The effect of this is that you can have two identical properties next door to each other, but if one was bought in 1977 and the other in 2007, the amount collected in property taxes will be radically different. Essentially, it's a tax on moving. If you are going to have a PROPERTY tax system, then you should tax the value of the PROPERTY. If you think property taxes are unfair, then don't collect them.
Next, it would seem to insulate people from their choices. Here in CT, we have budget referenda every year in our town. If we approve a 6% increase in spending, our property taxes go up 6% (or a little less if there's a bunch of new development). But in California, with Prop 13, you seem to have separated tax and spend. People can elect spendthrifts without any consequence.
Finally, a lot of the arguments for Prop 13 are very similar to the arguments for rent control. People would be priced out of their homes because the values were skyrocketing. First, if you constrained spending instead of one tax for one subgroup of people (i.e., long term owners of properties), property taxes wouldn't skyrocket as much. Here in CT we have revaluations and the mill rate drops after we do (but overall, property taxes increase a few percent due to the higher valuation). Well, if someone bought a house for $50,000 in 1977, and is paying $1,000 in property taxes a year, but the house is worth $500,000 now and the next door neighbor is paying $5,000 on an identical house, why am I supposed to feel sorry for the first guy? If we cap property taxes at 2% growth, should we also force rents to go up no more than 2% so people aren't priced out of their homes? Should electric rates be allowed to increase only 2%?
If you want to cut government spending, then limit the amount it can spend, either by electing people who will make those choices, or by amending the constitution or town charter. Heck, here in liberal CT, it works because we have budget referenda every year. But new residents aren't paying the brunt of property taxes, which is what happens in California.
Oh, and Prop 13 has just shifted the taxes elsewhere. Last time I looked, California wasn't a lot tax state.
Mayor V flunked the bar exam four times. Enough said.
Long time California resident and owning two properties, one is a rental. With the present tax I survive. If the tax on businesses is hit again, the only people left here who are hanging on to their social security, paid off properties and Ira's. I love my California, and pray sanity will return.
In the late 70's I traveled across the U.S. by automobile from Los Angeles to Washington, D.C. Everywhere I went, being from California made me a quasi celebrity.
How the situation has changed with California becoming one of the worst states to reside in and/or do business in.
If you think that the housing market is bad now just delite the best of 13 and see what happens to the people that have to count on 13 the tax base we all love a have enjoyed for so many years. It has kept people in their homes with out the burden of the higher taxes so they could afford the improvements and the gains if any when they pass or move away. It is the best thing that could have happened to calif and the older home owners
Many thanks to HOWARD!
If they do pass a repeal of Proposition 13, maybe Nevada should CUT their property taxes, especially on commericial properties. I wonder how many businesses will be moving across state lines then?
The problem isn't Proposition 13 or incoming property tax revenue. Its spending. The property taxes are still very high (like just about everything else in California). There is plenty of money for excellent basic city services.
Imagine how much higher the property taxes would have been had the politicians been allowed to raise them like everything else? Things would be even worse then they are already.
Proposition 13 is a excellent tax reform. In fact, Indiana recently reformed its property taxes in a similar manner (the property tax cap was added to the state constitution). Taking the ability to raise taxes from the politicians is the only way to keep taxes from rising too quickly.
In fact, this type of tax reform should be extended to all types of taxes and government fees.
It would also solve the problem of having other tax rates skyrocket due to "lower" incoming revenue from the capped tax. All types of taxes should be capped. Politicians need to understand that the money that is already taxed is the only money there is. Increases should be the last resort only.
It's far too easy to raise taxes (and fees) and the voters should have the final say on any increase. Yes, that means that there will be far less money in the government coffers at times. That's not a bad thing, available money is far too easy to spend on things that the government has no business spending.
The taxpayers are tapped out in this challenging economy. All they see in this recession are government employees going on spending like there was unlimited money somewhere.
There needs to be priorities when spending and budgets need to be realistic. The spending cannot be more then what is incoming. Government needs to live on a budget like every person and business does.
Villaraigosa: Typical left wing, entitlement minded, illegal alien supporting politician. The preeminent proponent of the type of thinking that got us into the mess we're in here in the "Golden State"!
I thinki Villaraigosa proposal is just another tactic do start with commercials building andthan on to houses and that would cause more people to leave california. I think the state of california is full of corruptions fromSacramento all the way to Los Angeles.
Los Osos home owners received in the mail from San Luis County Dept of Public Works firstname.lastname@example.org. The letter informing home owners that property tax bill 2011/2012 tax year will increase. The LOWWP assessment amount is $745.06 above what we already pay.
villaraigosa is the mexican al sharpton and jessie jackson all in one, hopefully future mexican americans will not follow his stupid a__ ediotic lead, since by history they are mostly conservative. oh ya villa is also a f______penis. dont forget to fill in the blanks and oh ya im mexican and i know a lot of us feel the same way, in fact a lot of us are moving out of state but villa just doest frigin get it. would he dare try this in mexico, no hed be lynched in two seconds and mexicans know this for a fact.
i bought my house in 1975 when brown was gov. and he backed destroying prop. 13. now he is back trying to do it again,along with antonio"pancho"villa(ragosa which he added from his disgraced ex-wifes last name.)alotro bandito! i'lived in califonia 58yrs. i bought my house in 1975 (@24yrs.old and would have lost my house had jarvis not stopped the corupt taxing by city politicians. (god bless howard) i am 61yrs. old now. i am leaving and never coming back to a soon to be ghost town inhabited by non paying illeagal aliens,who im sure will pay your exorbatant salaries & pensions. ASTA LA VISTA, BABY!!!!!!
Very good article by Mr. Senik. I liked the history before Prop 13.
The only awnser is the threat of South California
The California Democratic Party has systematically destroyed our beautiful state with its insane tax, spend, regulate, and sue policies.
When will our state's electorate wake up and throw these guys out of office?
I want no changes at all in Prop 13. We Californians wh nearly lost our property to taxes in the years before this home saving legislation came about wnt tit to stay intact for all homeowners and businesses alike.
Very Good Article
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 erratic income tax revenues.
It turns out that, under Prop 13, property tax revenue is FAR more stable than our other forms of tax revenue. Income tax revenue is plunging, and sales tax revenue is dropping.
But property tax revenue seldom goes down AT ALL. Since the year Prop 13 passed, San Diego County property tax revenue has ALWAYS gone up – every year – until this 2009-10 fiscal year.
The SD County Assessor reports that real estate property tax revenue for the fiscal year ending June 30, 2010 is down – but only 1.0%. This in the 4th year of California’s real estate meltdown. The year before, real estate property tax revenue was actually up 4.1%. Not one person in a thousand knows this – the press has not (yet) 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 year (generally those purchased prior to 2003) had their property tax go up 2%. Add to that the resales, property improvements and new structures (which establish new tax assessment levels), and the revenue stayed rather constant in the teeth of our economic downturn.
For 2008, California was ranked 14th 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 home were the 10th highest in the nation that year.
To see how CA ranks against the other states on various taxes and other economic factors, go to: www.RiderBlog.NotLong.com and read the latest updated version of my fact sheet “Breaking Bad – CA vs. the other states.”
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 90% of California's population.
According to the SD County Tax Assessor, in 1977 – the year BEFORE Prop 13 took effect – our countywide property tax revenue was about $639 million. As of the 30 June 2009-2010 fiscal year, our county assessor reports revenues of $4.596 BILLION. For every property tax dollar collected in 1977, the county this last year collected $7.20.
During that time frame, our county population has grown about 85%, and inflation has gone up about 260%. Hence property tax revenues today are substantially higher than the bloated PRE-Prop 13 year, even after adjusting for inflation and population growth.
The pitch for raising commercial property taxes is based on the usual "not paying their fair share" canard. But no one wants to talk about our very high corporate INCOME tax.
FACT: California corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. http://www.taxfoundation.org/files/bp59.pdf Table #8 -- we are 8th highest nationwide.
Although I am sympathetic to the general argument being made here, I wonder if using as evidence the continued popularity of Proposition 13 is a wise strategy. Of course a law that holds down taxes is likely to be popular, but it strikes me as a misuse of the ballot box if voters will also not curb their appetite government largesse, a course that Californians appear unwlling to follow. It looks as if fiscal responsibility is becoming a casualty of the democrartic process.
In 2014, Jerry Brown will be running for his third term, not his fourth term. He was elected in 2010 and took office in 2011. He may very well run in 2014 for re-election.
"That time frame aligns nicely with California’s 2014 gubernatorial elections, when incumbent Jerry Brown will be 76 years old and, many pundits speculate, more inclined to retire than to seek a fourth term as governor (Brown previously served two terms from 1975 to 1983)."
In 2014, Jerry Brown will be running for his third term, not his fourth term. He was elected in 2010 and took office in 2011. He may very well run in 2014 for a fourth term.
A small percentage of rich commercial real estate investors would have you believe that granting them an 80% subsidy somehow helps real business. Nonsense.
Proposals like Villaraigosa's stem from the increasing imbalance between homeowners' contributions to local services and commercial property owners'. This imbalance comes from the ability (and willingness) of long-time commercial property owners to hold on to their property indefinitely -- then to transfer it without effecting reassessment. In short -- they end-run Prop 13.
What pundits fail to mention, but business-owners know, is that new and growing businesses suffer just as much from this situation as residents. New commercial property owners -- much more likely to be employers than the ones nominally left over from 33 years ago -- carry the same burden as new homeowners. They pay 5X their competitors' tax bills ... and actually have to deal with the shortfalls in government services that falling taxes have caused.
The rapacious eagerness of financial investors in commercial property (and their lobbyists) to hide behind the cries of "lost jobs" obscures the fact that 40% of commercial property owners are paying full price already -- but 20% (with their comfy 1975 bases) are taking their gains to the bank. And the state to the cleaners.
VILLARAIGOSA is a member of the LA RAZA SUPREMACIST separatist movement of M.E.Ch.A.
He is a rabid racist.
Los Angeles has the highest rate of Mexican gang murder, and the COUNTY of LOS ANGELES pays out $600 million per year in welfare to illegals.
La Raza wants him as gov to expand the Mexican welfare state.
Already in Los Angeles,nearly half the jobs go to illegals using stolen social security numbers.
VIVA LA RAZA?