Did Prop 13 and Reagan Doom California's Finances?

Discussion in 'Politics' started by AAAintheBeltway, Jul 8, 2009.

  1. The current spin says yes. Facts? Not even close.


    Tax Fiction Sells In Hollywood
    By INVESTOR'S BUSINESS DAILY | Posted Tuesday, July 07, 2009 4:20 PM PT

    Rewriting History: Did Proposition 13 ruin California? Yes, says a now-popular myth, which explains the state's budget crisis as punishment for keeping taxes too low. But statistics are stubborn things.

    There are only two ways to get into a fiscal mess on the scale seen in California right now: You either spend too much or tax too little.

    Legislative Republicans, now joined by Gov. Arnold Schwarzenegger, have decided that chronic overspending is the problem. They insist that the budget gap be closed with no new taxes.

    The state's Democrats want a tax increase, and they're being egged on by cheerleaders such as Time magazine, which recently opined that California is paying the price for tax-cutting fever.

    At the "root of California's misery," says Time, "lies Proposition 13, the anti-tax measure that ignited the Reagan Revolution and the conservative era. In Washington, the Reagan-Bush era is over. But in California, the conservative legacy lives on."

    This sort of argument is emerging now, we'd guess, to help soften voter resistance to higher taxes not just in California but, sooner or later, at the federal level to pay for the spending frenzy of Congress and the Obama administration. Prop. 13, passed in 1978, is being trotted out as Exhibit A in the case against limited-government conservatism.

    There's just one problem: The case against Prop. 13 is factually unsound. The proposition did cut property taxes sharply and did set a high bar — a two-thirds vote in the Legislature — to approve new tax increases. But it did not turn California into a low-tax state, and it did not put state and local governments on a 30-year starvation diet.

    Los Angeles County, the state's and nation's largest by population, took a big hit in its property-tax take after Prop. 13 (see chart), but that revenue source recovered. It has racked up a 3.7% average annual gain since the mid-1960s, and 7.0% since Prop. 13. Local governments were able to raise other taxes and fees, such as business license taxes, without much opposition. State government rode the tide of prosperity (yes, California boomed through most of the post-Prop. 13 era) and just kept getting bigger.

    The net effect of the evolving revenue mix on California's taxpayers was to leave them very close to where they were before Prop. 13 — near the top in rankings of taxes paid.

    The Tax Foundation, which has tracked these statistics since 1977, put California's total state and local tax burden at 10.5% of per capita income, sixth highest among the 50 states and D.C.

    In 1978, the year before Prop. 13 hit, California ranked third, with a burden of 11.7%. Prop. 13 briefly knocked it down to 22nd in 1979, but the next year it was back in ninth place and has been in the top 10 every year since 1995.

    Even property taxes in California are above national averages when measured against income — that is, by ability to pay them. Census figures analyzed by the Tax Foundation show that California property taxes on owner-occupied housing in 2007 were 3.4% of the median homeowner income, compared to the national average of 2.9%.

    So let's go back to asking what, in Time's words, "has brought California to such a perilous state?" One answer, consistent with the facts, is that Prop. 13 didn't go far enough. It raised barriers to tax increases but did nothing on the spending side.

    And other attempts to limit spending (California technically has a cap now) were gutted by ballot initiatives to guarantee spending growth where it was popular, especially on schools.

    Another cause was the state's failure to stand up to public-employee unions. The key year here was 1999, when Gray Davis and the Democrats had just won back the governor's office from the more fiscally conservative Republicans.

    As Schwarzenegger noted last week in a Los Angeles Times op-ed, Davis and the Legislature quickly hiked state employee pensions "to a point where some employees could retire after 30 years, at as young as 50 or 55, and continue to earn 90% of their highest salary plus cost-of-living increases for the rest of their lives."

    Just to give some idea of the magnitude of the obligation the state took on with this one move, Schwarzenegger says rolling back pensions to pre-1999 levels just for new hires would save the state nearly $95 billion by 2040.

    All this suggests one answer to the tax counter-revolt: Government in California gets plenty of money. What it lacks is real leadership.

    Instead of tax increases, it needs lawmakers and governors who can look their special-interest benefactors in the eye and say, "No, this time we're putting the taxpayer first."

  2. Arnie


    Here's ther chart AAA

  3. Gee, I wonder if the national average of real estate prices is considerably LOWER than what real estate costs in California . . . Think that might have something to do with why owner occupied housing property taxes as a percentage of homeowner income is higher in California as opposed to the national average? Ya think???

    In any event, the bottom line is that California has a very narrow tax BASE and depends on a rather progressive personal income tax for most of its revenues . . . this is obviously a very bad idea given economic cyclicality, and the current downturn in the Economy.
  4. I guess you also have to look at the national average for income and see where the California average sits in comparison, don't ya think?

    Hey Landis, how much property tax does someone who lives in their mom's basement pay? You should know.
  5. Still waiting to see the screen-shot of your trading blotter.

    Oh, I forgot.
    You have nothing to do with the financial markets. You spend all of your day posting in the "Politics & Religion" forum of Elitetrader.com :D

    Tell me, does "prop-posting" pay well for a college kid out of school for summer vacation and living at home with their parents?
  6. LOL.
  7. Eight


    Lying Commie pos writers.. boycott all the commie media. I don't pay for any magazines or liberal rag newspapers...
  8. we all know what doomed California ...

    godless, idiot-leftists
  9. Eight


    Does CA qualify as a failed state... hmm, there has to be corruption.. Feinstein gets busted by a reporter about once a year for steering business to her husband's company[nothing ever happens to stop her from doing it again]... there is a couple of square miles of Los Angeles that is run by MS13.. the Mexican Mafia has a lot of territory they use to make meth... the southern border is controlled also by MS13... maybe in the classic definition CA is edging towards being a failed state...
  10. Arnie


    I agree. According to IRS figures, around 40 million WORKING people pay no Federal income tax. Also, an unknown number that have income below the threshhold for filing would add to this. Why not lower taxes for everyone, but make sure everyone pays SOMETHING? I've never understood that mentality that taxes are "bad". It's a duty, it's not some sort of punishment. Fwiw, I also believe in a graduated income tax....to a point. For the gvmnt to take 30% or more is a crime, imo. Taxes should be spread as broad and low as possible.
    #10     Jul 9, 2009