California Schools Suffer in Prop. 13 Tax-Cap Chaos

(Bloomberg) Three decades after Californians voted to limit their property taxes and helped start a national revolt with Proposition 13, some consequences are still emerging.

The average California real-estate tax rate is 60 percent lower than when the law passed in 1978, according to the Board of Equalization, the state’s tax administrator. The most populous U.S. state ranks 28th nationally in combined state and local property-tax collections per person in a 2011 study by the Washington-based Tax Foundation.

Yet the measure that inspired tax-limiting laws in New York and New Jersey is also blamed for California’s perennial budget crises, the proliferation of strip malls and auto dealerships, a decline in the state’s once top-10 ranking for spending on students and unequal tax bills among neighbors.

“Prop. 13 helped usher in the modern anti-tax movement,” said Robert Ward, the deputy director of the Rockefeller Institute of Government in Albany, New York. “Now, other states look at Prop. 13 as an example of what to avoid.” ...........(more)

The complete piece is at: http://www.bloomberg.com/news/2011-07-12/california-schools-suffering-as-proposition-13-tax-cap-breeds-fiscal-chaos.html

Property tax is less than a quarter of the pie. The model depends on steady, high rates of employment at good pay.

The biggest reason the state is hurting for revenue now is high unemployment. The state should be encouraging job growth, not pursuing policies that push businesses out.

The assessment and the property tax on my family's home in San Diego more than quintupled between 1966 and 1976. My mom had used the small amount of life insurance money she collected from my father's premature death in 1965 as a down payment on a house that turned out to be in a highly desirable neighborhood. She re-married in 1967 to a man who had high alimony and child support payments. There is no way my mom could have predicted the meteoric rise in market value of her house. We had neighbors who were facing being literally taxed out of homes they'd lived in since the 1940s and 50s. People who have lived in their homes for a long time tend to be on fixed incomes, so it isn't really fair to base their tax assessment on what other, typically younger people paid for other homes in the same area.

The annual property tax increases were a serious drain on the family budget, at a time when inflation was also a big problem on food, fuel, and other necessities. I voted Yes on Proposition 13 in 1978 when I was 20 years old, and I'd vote against any proposal to throw it out wholesale.

If someone wants to talk about rolling back restrictions on reassessment of commercial property, that might result in a meaningful discussion. Painting the whole of Proposition 13 as bad medicine won't lead to anything useful. The core reasons for its adoption are still there.