Jon Coupal likes to say his hard-fighting organization, the Howard Jarvis Taxpayers Assn., exists to beat back constant attacks on Prop. 13, the landmark 1978 initiative that limits property taxes in California.
In reality, it’s the Jarvis group – named for the longtime Los Angeles anti-tax gadfly who co-authored the measure – that’s constantly fighting to keep Prop. 13 in a warped state very different from what was pitched to voters.
One big question as the state heads into an election year is whether Californians are at last ready to restore Prop. 13’s intent. Count on Coupal and his group to fight fiercely against any such change, as they have so effectively in the past. Yet, restoring Prop. 13 to what most voters thought they were getting would obviate any need for the proposed tax increase initiatives now multiplying like rabbits.
Any time traveler revisiting the California of 1978 would see a land where residential property taxes were skyrocketing, based as they then were on the latest market value of each property. Not the latest sale price, but a market value assigned to every piece of property by county assessors who based their numbers largely on “comparables,” the prices of similar homes in the same or nearby neighborhoods.
When Seniors Fled
Many senior citizens and others on fixed incomes lived in dread of the annual assessment letter informing them of their home’s purported new value. Plenty (no one knows the exact number) felt compelled to sell as property taxes rose steadily.
Along came Jarvis and his Sacramento-based pal, Paul Gann, with Prop. 13, which they sold as a measure designed to give homeowners financial predictability by setting their tax at 1 percent of any property’s most recent sale price or its 1975 assessed value. The tax could rise no more than 2 percent each year after that. No one made much mention of apartments or commercial and industrial property.
Two of the results: California has had systematic tax inequality for the last 33-plus years, with neighbors in similar houses paying radically different taxes, mostly based on when they bought and not on the current value of their homes. Originally there was some question whether this would violate the equal protection clause of the Constitution’s 14th Amendment, but the state Supreme Court quickly said it was okay. The ruling stands unchallenged.
Unfair Tilt on the Burden
Another significant result has been that homeowners pay a far larger share of the property tax bill than businesses in many places, a big change from 1978.
In Santa Clara County, where the proportions were about equal in 1978, commercial property owners lately have paid only about 35 percent of the bill, compared with 65 percent for homeowners. In Los Angeles County, homeowners then paid about 52 percent of the freight; now they pay almost 70 percent. The change has been similar in many other places.
This comes partly because of a loophole adopted by the Legislature in 1979, just months after Prop. 13 passed, which lets some partnerships and merger deals evade reassessment when properties change hands. It’s also because apartments and commercial and industrial property are not usually sold as frequently as houses and condominiums.
That’s one reason the so-called “split roll” concept where non-residential property would be taxed at a different rate from homes and condos has refused to go away since it was originally proposed in 1979.
Split roll never has come close to adoption, but it has been proposed repeatedly, with Gov. Brown raising the issue in a tentative way last summer, when he tried unsuccessfully to jawbone Republicans in the Legislature into extending some temporary taxes adopted in 2009 as a budget-balancing tactic.
Brown has not spoken of the split roll since, but he has not recanted.
Neither Brown nor anyone else backing the split roll has ever suggested changing residential property taxes one iota. Contrary to what Coupal often suggests in newspaper columns and direct mail pieces, there is not and never has been a threat to the original home-saving intent of Prop. 13.
The time may have arrived for serious consideration of both closing the partnership/merger loopholes and adopting a split roll.
For sure, business lobbyists and others will argue these changes are job killers. With Prop. 13’s huge tax breaks for business in effect, California has fallen into some of the highest unemployment in the nation. Have these breaks been anything more than a gift to business, mostly big businesses like the CVS drugstore chain, Macy’s department stores, Wells Fargo Bank and a Gallo family winery in Napa County?
Evidence suggests the current rules amount to welfare for business, not a job creator, with little benefit for most Californians. Just another reason it is high time for some changes in the way Prop. 13 is administered.
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Mr. Elias may be contacted at tdelias@aol.com. His book, “The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It,” is now available in a soft cover fourth edition. For more Elias columns, see www.californiafocus.net
