In June 1978, Jerry Brown was sitting on a huge budget surplus: $5 billion. In 2014 dollars, that $5 billion of 1978 would be equivalent to $18 billion. When Proposition 13 passed on June 6, 1978, a lopsided majority of 63 percent of voters approved the measure. But knowing that the revenue from property taxes would be slashed, a swarm of local politicians descended on Sacramento to carve up Brown’s $5 billion state surplus and have that surplus money sent from Sacramento to local jurisdictions.
The year was 1978. On June 6 of that year, California voters passed Proposition 13, a measure to roll back local property taxes to 1975 levels and make raising such taxes, in the future, very difficult.
Led by two anti-tax crusaders, Howard Jarvis and Paul Gann, Proposition 13 was put on the state ballot by these two men. They gathered enough signatures to give Californians a ballot measure that would halt virtually all automatic increases in property taxes.
Before Proposition 13, property taxes would go up automatically. The tax hikes would be based on a formula related to a property’s assessed value. For example, if a home’s value went from $100,000 to $200,000, the property tax would automatically increase.
Between 1973 and 1978, real estate prices began to soar. As real estate went up in value, so did property taxes — again automatically.
Many people, especially the elderly, believed that they would be taxed out of their homes.
Jarvis and Gann, sensing how important a person’s home is, claimed that with Proposition 13 property taxes could only increase a maximal two percent a year unless voters approved a tax increase for a higher amount. And any tax increase would have to be approved by a two-thirds supermajority vote of local residents.
Proposition 13 placed a limit on property taxes. The limit was one percent of a property’s assessed value.
In 1978, California’s governor was Jerry Brown, the same man who is governor today. Brown, a Democrat, was elected to a first term as governor in 1974 and was up for a second term in 1978. He won a second term. (In 2010, Brown was elected to a third term and this year is seeking a fourth term.) Brown’s father, Pat Brown, also a Democrat, was governor from 1959 to 1967.
Politicians, however, do not give out money without demanding some control over how that money is used.
Thus, Proposition 13, effectively emasculated local control, replacing such control with state-government control. For example, local school districts, now lacking money, received state-government money to make up for losses. And Sacramento now had a say in how that money could be spent.
Giving all this power to Sacramento had unforeseen consequences.
Now, 36 years later, Sacramento is still telling local communities how to behave. But Sacramento is making more demands than ever before.
Today, Sacramento is demanding that local communities create a Housing Element, a plan to have local governments create housing for low-income people. Many communities in the San Francisco Bay Area are being told to produce a Housing Element or face a cutoff of state-provided money for road repairs.
Sacramento is also demanding that driving patterns be altered. The goal is to reduce pollutants emanating from motor vehicles.
That’s not all. Sacramento, acting through regional governmental agencies, is telling local communities to build high-rise, high-density housing (often called stack-and-pack housing) near transportation hubs like train stations.
Proposition 13 may have made efforts to raise local property taxes harder, but it also lead to a huge transfer of power from the local level to the state level.
Perhaps California needs a new Proposition 13, one that will keep property taxes low and protect local communities from being bossed around by Sacramento bureaucrats.