Good overview of the long term impact of the revolutionary grassroots effort that began in California and spread to many other states.
Friday, September 14, 2007
California Focus: Prop. 13 doesn't harm new housing
Study finds a common criticism of the tax-cutting measure is false.
By JON COUPAL
That loud crash you just heard is the sound of another Proposition 13 myth being busted. It turns out that, contrary to the claims of some county and municipal officials, new housing pays its own way.
But before discussing the debunking of another canard about California's legendary taxpayer protection initiative, let's quickly review the origin of some of the myths most often repeated about Prop. 13.
Prop. 13 was placed on the ballot through a grass-roots effort in 1978. Homeowners were seeing a doubling, even tripling, of their property taxes in just a few years. When state government refused to take action to save their homes, property owners rose up and qualified an initiative, Prop. 13, to limit property taxes and guarantee the right to vote on any new local taxes.
Anything that spoke of limiting taxes was viewed as a threat by politicians, who regarded the ability to spend as the source of their power; public employee unions, who considered the limits a threat to future pay increases; and powerful elements in the business community, who feared that the Legislature would replace any loss in property tax revenue with tax hikes on businesses.
This coalition waged a desperate, vicious campaign. For example, voters were told that if Prop. 13 passed, police and fire departments would be unable to respond to emergency calls. And the measure would destroy education, opponents warned.
After Prop. 13 passed, police and fire services still were adequately funded. Other falsehoods, like the ones about education, gradually morphed and became urban myths that were promoted by those who continued to resent Prop. 13 and the popular uprising it represented.
So, we continue to hear that Prop. 13 has decimated school funding, which of course is not true. After adjusting for inflation, California spends 30 percent more per pupil today than it did prior to Prop. 13. The tax-limiting measure is also blamed for robbing school districts of local control over finances and transferring this power to the state. Again, not true. The way we now fund education is the result of a California Supreme Court decision that predates Prop. 13 by seven years. In the case of Serrano v. Priest, the court ruled that the property tax could not be used as the basis for funding local schools because a property-tax-based system resulted in communities with higher-valuable property being able to spend more per pupil than those with less-expensive property.
So what about the common claim that Prop. 13 has limited the supply of new housing since city and county officials are loathe to approve new homes because they do not pay for themselves by returning sufficient tax revenue? A just-released study, "The Housing Bottom Line: Fiscal Impact of New Home Construction on California Governments," shows that after subtracting for costs to government, new housing more than pays its way.
