David Kline: Taxes and time travel
January 28, 2018
In his column supporting property tax increases in California ("Will 2018 be the year Prop. 13 intent is restored?"), Thomas Elias envisions time travelers going back to view the 1978 property tax reform debate and not hearing much about commercial property taxes.
Not so fast! Unless the time travelers were too busy disco dancing and buying bell-bottoms, they would notice a healthy debate about taxes on all types of property.
On the same ballot as Proposition 13 there was Proposition 8, proposing a "split roll" in which business property could be taxed more than residential property.
The two propositions were discussed far and wide as rivals. The major candidates for governor appeared at a real estate conference to discuss their positions on both measures, and Associated Press coverage of the event described "the split roll concept that is … part of Proposition 8."
Supplementing the numerous newspaper stories about the measures, Proposition 13 coauthor Howard Jarvis debated Assembly Speaker Leo McCarthy (a supporter of Proposition 8) on television and radio in the state's largest media markets. Legislative candidates were grilled about their positions on the propositions. Teachers' unions campaigned for Proposition 8, and local officials weighed in with resolutions supporting Proposition 8 and opposing Proposition 13.
The issue even made the national news. The night before the election, NBC Nightly News reported: "Proposition 13 applies to all property – businesses as well as homes. Proposition 8 is an alternative tax reform proposed by the state Legislature. Proposition 8 would allow businesses to be taxed at the present rate, but would offer homeowners a 30 percent cut in taxes." The broadcast, anchored by David Brinkley, was on one of only three American television networks that existed at the time, so it was seen by many voters.
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How prominent was Proposition 8? Gov. Jerry Brown signed the ballot argument in favor of it.
In short, anyone who was paying attention knew there was a split-roll measure on the ballot. When the votes were counted, Proposition 13 had 64.8 percent of voters in support, despite a massive opposition campaign, and Proposition 8 was rejected by 53 percent of the voters.
The clear intent of the voters was to reduce the property tax burden while maintaining California's long-standing policy of equal treatment of all properties. Under Proposition 13, all property is taxed at 1 percent of value plus a rate to pay for any indebtedness (local voter-approved bonds). For locally assessed real property, the assessed value is the lower of market or acquisition value. Most such properties are reassessed upon a change in ownership or new construction.
The predictability of this system solved the pre-1978 problem of homeowners and business owners being surprised by huge increases in taxes from year to year.
Under Proposition 13, there has been no shift in the tax burden to homeowners, who paid 41.8 percent of the total property tax burden in 1979-80, and now pay a slightly smaller share, at 37.1 percent of the total); there has been a steady stream of revenue for local government, with assessments growing at an average rate of about 7.07 percent per year (outpacing inflation and population growth); and the property tax is recognized as the most stable source of government revenue.
Knowing all of this, the time travelers will want to stay in 1978 long enough to vote with the overwhelming majority of Californians who recognized the benefits of Proposition 13 and the hazards of a split-roll system.
David Kline is the vice president of communications and research for the California Taxpayers Association.