Well, that certainly got your attention. I’d like to direct you to an excellent, dare I say seminal piece of reporting on the elephant in the California real estate room: Proposition 13. I’ll quote a few grafs here, but I really would like you to read the entire piece.
By Christopher Palmeri, Bloomberg/Businessweek
October 17, 2011, 12:23 AM EDT
Oct. 17 (Bloomberg) — California voters approved Proposition 13 to rein in property taxes that had doubled in 10 years. More than three decades later, that rebellion has mortgaged the state’s future, saddling it with the nation’s highest debt and lowest credit rating.
The measure led to reductions that dropped per-student school spending from seventh to 29th nationally, prompted cities to pursue sprawling retail development to compensate for lost revenue, and pushed the state into budget gridlock, including a $705 million revenue shortfall announced Oct. 10, by requiring two-thirds approval for any tax increase.
“Proposition 13 set up an unfair and dysfunctional two- tiered system of property taxes,” said Kevin Starr, a history professor at the University of Southern California and the author of a series of books on the state. “It choked off a source of revenue, and the lack of that revenue has brought California to the edge.”
The measure, approved in 1978, was the inspiration for an antitax movement that has taken hold of the public discourse in Washington and in state legislatures throughout the country. It caps real estate levies at 1 percent of a property’s most-recent sale price. Before it passed, local governments could raise revenue as they saw fit.
Here’s a few more colorful quotes from this story:
- “You couldn’t invent a crazier system,” [Santa Clara County Assessor Larry] Stone said in a telephone interview.
- “It’s had a profound impact on multiple levels,” said Jean Ross, executive director of the California Budget Project, a nonpartisan research group in Sacramento. “The one that’s underestimated is the shift in decision-making from the local level to the state. All of our public systems have been affected by our seemingly perpetual budget crises.”
- “Prop. 13 has had the unintended effect of favoring commercial property owners at the expense of homeowners,” [Los Angeles Mayor Antonio] Villaraigosa said Aug. 16 at the Sacramento Press Club. “Let’s apply Prop. 13’s protections to homeowners and homeowners alone.”
- “This is a nightmare,” said Mohammad Islam, San Bernardino’s assistant superintendent who has worked in school finance for 22 years. “It’s impossible what the state is doing to us.”
Yet despite all California’s budget woes (as described by Michael Lewis in Vanity Fair), there is no organized movement toward either doing away with, or even modifying Proposition 13 to a homeowners-only tax adjustment. While presented as a way to keep senior citizens from losing their homes to skyrocketing property taxes, Prop 13 has become a windfall for commercial and corporate property owners instead.
Meanwhile, California’s public school system has declined from seventh in per-pupil spending to 29th according to this article. If you go by this NEA report, it’s 36th. According to this article from KQED, it’s 42nd. Or 43rd. Or 46th. More importantly, education quality has dropped as well. California ranks 46th of 51 (50 states plus District of Columbia) on test scores in 2003. This more recent ranking had California come in 30th (but this appears to be a different series of grades).
That NEA report said we’re #3 in prison spending per capita, though! Woot!
Now, if you don’t think an educated citizenry is an important goal, then you can tell me to shut up already about school funding. But I suspect most knowledge workers (such as Silicon Valley engineers or San Francisco creative class members) would want our schools to return to their previous high quality, and that means starving them is not in our interest.
Let’s hear from someone else who doesn’t agree with that. Furthermore, this is someone who writes a San Francisco real estate blog. Here is his complete takedown of that 2600 word Bloomberg piece. Ready?
Bill Quick, San Francisco Real Estate Blog
The political big spenders absolutely hate Prop 13, because it cut off their unlimited access to the piggy bank of private property taxation.
The truth is, our spending on essentials like education, public safety, and other bottom-line items is not being constricted by Prop 13. It is being choked off by the propensity of governments at both the local and state levels to spend money on tens of thousands of pet projects and pet constituencies, rather than paying for services that voters feel are the most basic. We’re not broke because our state “salary” (taxes) is too low, it’s because we spend way too much on non-essential fripperies.
Wow, I’m speechless from that relentless chain of brilliant logic! And to be fair, when I called Quick on his heavy use of facts and supporting evidence, he did respond with this:
Enjoyed your sarcasm! I’ll be looking forward to your piece supporting runaway property taxes and booting retired boomers into the street, too. Of course, California’s housing economy is in such great shape that property tax hikes should be just the ticket for rocketing us to even greater heights!
Right. Because interest rates and inflation are exactly the same as they were in 1978, and property tax assessments are rising faster than college costs. Then there’s this:
Here’s a bunch of stats on California’s tax and business climate. Short takeaway: We’re in awful shape, with one of the highest overall tax burdens in America.
The bunch of stats are from the Tax Foundation, so I looked into just who they are and what their real motives are. They’re funded by high-minded humanitarians such as the Koch Foundation (as in Koch Brothers) and ExxonMobil. They obviously have your interests in mind rather than those grabby one percenters! Would you expect anything less from a group founded by the CEOs of General Motors and Standard Oil other than whether grannies are getting taxed out of their Cayman Island Corporations and have to bunk in their Swiss bank deposits?
Paul Krugman (a know-nothing economist who won a stupid Nobel) accused this group of committing “deliberate fraud” in their evaluation of Obama’s jobs proposal. This isn’t the first time he’s questioned their methodology, either. But let’s drink to “the tax is too damned high” Kool-aid that the Tax Foundation is pouring.
It’s a lot cheaper than actually fixing things.