Heres part of what columnist Bruce Bartlett wrote in celebration of the 25th anniversary of the passage of what he called “one of the most important political/economic events in American history: Proposition 13.”
This initiative, which was approved by the voters of California on June 6, 1978, sparked a “tax revolt” that spread throughout the country and continues to reverberate today.
The impetus for Prop. 13 was the inflation-induced housing price boom of the 1970s. Investors seeking to preserve their capital poured their savings into tangible assets like real estate. With double-digit inflation also pushing up prices, many homeowners suddenly found themselves living in houses worth many times what they paid for them. But with property taxes based on assessed values, this meant that tax bills were also rising sharply. Since incomes were not rising as fast as prices or taxes, some California homeowners found that they couldnt pay the taxes and were forced to sell their homes.
Howard Jarvis and Paul Gann, leaders of two California taxpayer organizations, joined forces in 1978 to put an amendment to the state constitution on the ballot that would limit property taxes to 1% of assessed value in 1975. Valuations were frozen until the property was sold. And just to make sure that other taxes were not increased to compensate, a two-thirds majority in the legislature was required to raise taxes.
Dire Predictions by Panicked Liberals
At first, California politicians ignored the Jarvis-Gann effort. But when polls showed that the measure would pass, they panicked. Dire effects were predicted if taxes were cut. Police officers, firefighters and teachers would all be laid off, voters were told. Unemployment would rise and the states economy would be decimated.
Lest you think I exaggerate, consider these quotes from an April 17, 1978 Washington Post story:
Former California Gov. Edmund G. (Pat) Brown: “If I were a communist, I would vote for Proposition 13.”
Los Angeles Mayor Thomas Bradley: Proposition 13 will “hit the city like a neutron bomb, leaving some city facilities standing virtually empty and human services devastated.”
Howard Allen, president of the Los Angeles Chamber of Commerce: Proposition 13 is “a fraud on the taxpayer that will cause fiscal chaos, massive unemployment and disruption of the economy.”
Some economists at the University of California at Los Angeles predicted that the states unemployment rate would rise by 4.5 percentage points, from a projected 6.7% rate in 1980 if Prop. 13 was defeated to 11.2% if it was enacted.
Despite a massive advertising campaign against Prop. 13, financed by the states business community, which almost universally opposed the measure, voters held firm in their support. On June 6, 1978, they backed it by a 2-to-1 margin.
Almost immediately, it became clear that all the predictions of doom and gloom were so much hot air. Within months, the critics even admitted it. A New York Times report on February 11, 1979, was headlined: “Little Impact Seen in Coast Tax Slash.” On March 7, 1979, another Times report carried this headline: “Dire Predictions on Proposition 13 Have Not Materialized.” The latter story had this to say:
“Fire and police protection have been virtually unaffected by the proposition . . . . Schools are spending about as much money as they did last year. Some services, such as libraries and flood control, have been cut. But, for the most part, the eliminated services appear to have gone unnoticed, according to interviews with many residents.”
What about unemployment? According to the U.S. Bureau of Labor Statistics, Californias unemployment rate was 7.1% in 1978-well above the national rate of 6%. By 1979, the gap had narrowed, with the state unemployment rate at 6.2% versus a national rate of 5.8%. Although the California unemployment rate rose in 1980, at 6.8% it was below the national rate of 7.1% for the first time in many years.
There is no record that the UCLA economists ever apologized for their gross error.