The current budget crisis in California, along with the recall campaign it helped to create, has renewed the discussion of Proposition 13. This tax-limiting provision voted into law by the people of California 25 years ago led a tax revolt that changed the nation.
Because it is likely that many people do not know the details or importance of Prop 13, here are a few excerpts from past HUMAN EVENTS articles on the subject of the ballot initiative that moved the country.
[Proposition 13], 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.
Californias current economic problems stem largely from excessive state spending, which strongly indicates that enacting spending limits would be an excellent strategy for reducing the size of state government over the next 25 years.
During the late 1970s, anti-tax activists enjoyed considerable success limiting property taxes. However, Prop. 13 easily became the most well-known of those efforts. Indeed, Prop. 13 was a tremendous short-term success, reducing taxes by a staggering $6 billion. Prop. 13s impact, however, went far beyond tax relief. The economic boom that followed Prop. 13 gave credence to the idea that tax cuts were economically beneficial. Furthermore, Prop. 13 generated nationwide momentum for tax reductions. Even President Carter and the Democrat-controlled Congress were motivated to reduce capital gains taxes in the wake of Prop. 13.
[The origins of Prop 13] began in the mid-1960s when Howard Jarvis accompanied a middle-aged woman to the Los Angeles County Hall of Administration. The woman appealed to county officials to lower her soaring property taxes. However, county officials were not persuaded and insisted that she would have to pay the full amount on her bill. The shock this woman felt was so great that she had a heart attack in the county building and died that same day. [???]
During the late 1970s, most other states lacked the combination of soaring property taxes, a recalcitrant legislature, and a large surplus that made Prop. 13 a reality in California.
As a result, most attempts to enact replicas of Prop. 13 failed. However, in the years following Prop. 13s enactment, 17 states passed expenditure limits. In fact, Californias spending limit, known as the Gann Amendment, enjoyed some success at limiting government growth during the 1980s.
Remember, Arnold Schwarzenegger’s top economic adviser Warren Buffett, in an interview with the Wall Street Journal, suggested that property taxes in California are too low (“Schwarzenegger Adviser Buffett Hints Property Tax Is Too Low,” August 15, 2003). So would he recommend an attempt to circumvent or negate Prop. 13 in order to increase taxes?
Republicans can ill afford to have a GOP California governor who is at serious odds with President Bush regarding the beneficial impact of tax cuts — not tax increases — on the economy.