Friday, June 7, 2013

Prop 13 is Back on the Table Where it Belongs

The debate on California’s Proposition 13 is in full swing.  Inspired by recentrevelations about the large-scale loopholes through which big property ownerscan sail unscathed, as well as by dissatisfaction with the Governor’s insipid answer to our state’s structural crisis and democratic deficit in the form of Prop 30, voices are being raised around the state, questioning what was once a virtually unassailable piece of our massive and overbuilt constitutional edifice. 
To recap, Proposition 13 was passed by voters in 1978 to reduce considerable property taxes and keep grandma from being turned out of her home.  Or at least that was part of the story.  Anti-tax advocates used this populist narrative as cover for a sweeping initiative which cut property taxes, restricted the rate at which said taxes could be increased, and required a two-thirds vote in the legislature to raise taxes in the state.  The blowback from this ill-advised initiative was the immediate centralisation of funding responsibility (for schools in particular) and the enshrinement of the principle of minority rule—for what else could you call a system in which raising revenue requires a two-thirds majority in the legislature while one-third of the same body could arbitrarily shred our social system.

Over time, more benefits have accrued to big property owners than to the “average” homeowners the measure was ostensibly designed to protect.  Our state has also suffered, as our public sector has shrunk, meaning a poorer quality of pre-K-12 education, universities which price-out many students, shuttered parks, creaky infrastructure, and a capitol which smells like the Augean Stables (and let's face it...Jerry Brown is no Hercules). 

Supporters of Prop 13 are beginning to hyperventilate, fearing that the scam they’ve been practising for 35 years now might shrivel if it sees the light of public scrutiny.  But in their panic, they are jumping the gun.  In an overwrought and half-witted op-ed in the Sacramento Bee, Jon Coupal, President of the Howard Jarvis Taxpayer Association (the anti-public organisation responsible for the passage of Prop 13) cited a study which claimed that nearly 400,000 jobs would be lost in five years if California moved to a split-roll system.  It’s an interesting (and I suspect farcical) claim, given that we don’t actually know how the roll would be split or what the different rates for corporate as opposed to household property, for example, would actually be. 

In an editorial nearly a year ago, Coupal took umbrage at the suggestion that Prop 13 had the effect of “[allowing] those who owned homes in 1978 to avoid ‘paying their fair share’ and shift the cost to newcomers”, claiming instead, rather absurdly, that “the actual goal of Prop 13 was to provide certainty in taxation”.  The problem with this analysis, as noted by Mark Paul (co-author with Joe Mathews of the superb treatise on political reform in the state, California Crackup), is that Prop 13 did no such thing.

Paul points out that the passage of Prop 13 created a massive revenue gap for Californians, who still wanted to live the dream.  “They have filled that void”, he notes, “partly by raising sales tax rates; and partly from the rising yield of the personal income tax, which delivered more and more dollars because of the enormous shift of income to the wealthy that has taken place over the past several decades”.  But the tax formula that has evolved over the decades since 1978 has not led to the kind of stability which Coupal trumpets from his fundamentalist bunker.  What the state has seen instead is extraordinary volatility, in which, as Paul describes, “income tax collections swing with capital gains in the markets, and taxable sales swing with the economy (they fell 18 percent from 2007 to 2010)”. 

And as Paul reminds readers of his blog, The California Fix, even pre-fundamentalist conservative orthodoxy (in the form of Milton Friedman) accepts the proposition that property taxes offer much greater stability than the alternatives.  “Shifting taxes toward land, oil, and carbon”, Paul writes, “and reducing them on work and investment would strengthen the economy while providing a more stable base for public services”.

Of course, government from beyond the grave in the form of Prop 13 is only part of the puzzle, just the most egregious example of the inconsistency and political stagnation that our mangled politics generates.  Paul and Mathews’ book outlines what some of the other pieces of that puzzle might look like: a reinvigorated and more democratic electoral system; proportional representation to give voters a finer grain of representation that might involve more than two parties; overhaul the convoluted dispersal of authority and responsibility for policy spheres across many levels of government; renew our direct democracy to create something like a partnership between citizens and their representatives instead of the adversarial relationship that characterises our polity today. 

All of this makes it clear that however much it might be tempting to simply call for the dissolution of Prop 13 under the assumption that our problems will then fade away, the reality is that reforming California will take much more sustained and thoughtful engagement.  And that this engagement and commitment will have to come not just from our political leadership, but also from our citizenry.  To paraphrase Churchill, a serious debate about Prop 13 marks not the end, nor even the beginning of the end, but perhaps, if we keep our eye on the ball, the end of the beginning. 

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