Your decision at the ballot box Tuesday could have deep and lasting impacts. Case in point: Proposition 13.
Passed 40 years ago Wednesday, the People's Initiative to Limit Property Taxation kept many struggling Californians in their homes by limiting property tax increases. But it also posed new problems the state still grapples with today.
“Proposition 13 I think of as a really shocking event, almost like a meteor that landed in California, in a way,” said Isaac Martin, chair of the sociology department at UC San Diego and author of two books on the measure. “It had all kinds of powerful ripple effects.”
Some would argue those ripples have capsized school budgets and other social endeavors in the state. It’s why some Californians have already launched a campaign to amend Proposition 13 at the ballot box in 2020.
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Martin sat down with KPBS to discuss the legacy of the People’s Initiative. The following conversation has been edited for length and clarity.
Q: Can you tell us about Proposition 13 — what circumstances it passed under and what it does?
A: In the late 1970s, California was in a real property tax crisis. Then, as now, people’s home values were going up really fast. But at the time, people were being assessed and taxed on the market value of the homes they owned. So if the value of your house doubled, then your property tax doubled, too.
The voters of California were really up in arms about this and a lot of Californians were really concerned that they would actually be taxed out of their homes. Proposition 13 capped the annual increase in the assessed value of your property, so that your property taxes couldn’t go up very fast even if your home was becoming more and more valuable.
It also required Californians to vote to increase local taxes and imposed a super-majority rule. So for special taxes, like those for schools, you have to clear a two-thirds threshold.
Q: What has been the long-term impact of Proposition 13?
A: It definitely slowed the growth of property tax revenues in California. And, at the time, property taxes were the main source of revenue for public schools, so it made it harder to keep up as it became more and more expensive to educate our children in California.
Another thing it did was politicize the process of raising taxes. Now, every time Californians go to the ballot box they face a question about whether taxes should be raised. That means that at election time it’s constantly on people’s minds, and politicians noticed and started to really make hay of that as a partisan issue in a way that it wasn’t before.
Q: There’s a lot that has changed since Proposition 13, but largely because of it, schools rely mostly on income taxes, right?
A: It did lead to a shift from local property taxes to state income taxes. That, in some ways, has actually been pretty good for equality across schools compared to the system we had in the ‘70s, but bad for stability of finances over time. School financing has been subject much more to a boom-bust cycle than in the past.
Q: And you mean “good for equality” because now the pie is sliced more equally among districts, as opposed to before, when it depended on how much your surrounding community could generate in property taxes?
A: If you finance schools only from property taxes that are local, then places where property values are high are places that can afford to support fabulous schools with a very low tax rate. Funding the schools out of state income taxes does have the effect that higher income people are paying more for educating children throughout the state.
Q: What are some of the other ways that schools have found to build revenue?
A: They have often turned to local parcel taxes, which are a tax, not on the value of your home, but a tax on the mere fact of owning a parcel. Parcel taxes are the most common local tax now raised for schools in California and it takes a two-thirds vote of the people. That’s been very common, especially in coastal California.
Q: What are some of the pros and cons of that approach?
A: Parcel taxes do allow local communities the chance to raise more money for the schools in their community if they want to. And we can see that as a good thing from the standpoint of local control.
Compared to other kinds of property taxes, they’re much more unequal. Someone who owns a home worth $5 million might be taxed the same amount as someone who owns a home worth $200,000, because they both own a parcel. It’s created more inequality of the financing mechanism within California communities.
Q: And to pass a parcel tax, schools have kind of had to do what the people backing Proposition 13 were hoping for, which is lay out how this money will be spent and, presumably, be more accountable to the voters?
A: School districts in California do have to tell the voters what they intend to spend the money on. And if you look at parcel tax measures, they’re often very detailed in spelling out exactly how they intend the money to be spent. I do worry sometimes that that leads school districts to emphasize flashy or popular ways of spending money, rather than the ways of spending money that teachers and students most need in order to accomplish effective education.
Q: People are talking about a possible 2020 initiative to amend Proposition 13. What would that look like?
A: We often think about Proposition 13 as a measure that prevented tax increases on homeowners, but it actually prevented tax increases on owners of all kinds of properties, including some large out-of-state corporate owners of very large commercial properties. That ends up costing the state a lot of revenue that could be spent on schools and other public goods. So one of the proposals is to preserve the protection for homeowners and raise revenues by reassessing large commercial properties at their true market value, which according to an estimate from the University of Southern California, could yield as much a $11 billion in revenue for the governments of this state.
Q: Opponents of that idea feel that it could pull business out of California. Have you seen anything in your research that speaks to that?
A: When we know the details we’ll know more about what risks there might be to the state’s economy. I will say I’m not particularly worried that taxing commercial property at its market value would drive away business. Businesses have all kinds of reasons to locate in California, and if the measure is reasonably, carefully crafted, it would be very easy to tax at the fair market value some very large corporations that own land in California without harming small businesses.
Q: You’ve written two books on Proposition 13. The last one was looking at the 30-year anniversary. We’re now at the 40-year anniversary. What is the takeaway from your research?
A: Proposition 13 I think of as a really shocking event like, almost like a meteor that landed in California, in a way. It couldn’t have been predicted. There were lots of other solutions to the property tax crisis, but it had all kinds of powerful ripple effects, some far beyond the state of California. I think it reshaped American politics in ways that are quite dramatic.
We could see it as a kind of forerunner to a lot of the national conflicts we’ve had over taxation in the last 40 years. So I guess my biggest takeaway is that surprising political events can have enormous consequences for American politics. And when Californians decide to do something, sometimes it can have ramifications for the rest of the country.
