California is where it is because of 40 years of R govs. We began to die when Prop 13 passed. No coincidence that both Cal and the US finally see the results of 40 years of Raygunism.
The Curse of California's Proposition 13
By Edmund L. Andrews; Edmund L. Andrews is a writer who specializes in business.
Published: Friday, June 17, 1988
This month, Californians are observing the 10th anniversary of Proposition 13, the famous voter initiative that rolled back property tax assessments and sparked a wave of tax revolts across the country.
To believers, Prop. 13, as it is known, amounted to a primal scream by The People against Big Government. No longer would homeowners, particularly elderly people on fixed incomes, have to watch their property taxes skyrocket just because land values soared. No longer would governments grow wildly, their treasuries swollen by soaring real-estate prices. The people had finally had their say: ''Enough!''
These goals may well have been accomplished, but at unforseen costs. Yes, government services may have declined somewhat, and streets and sewers may be in danger of falling into disrepair, but that's not where the real damage has been done. There has been a huge shift in the tax burden to young families from older homeowners and owners of businesses. Also, Prop. 13 has fostered a perverse bias toward construction of shopping malls and hotels rather than low-cost shelter. Beyond that, because of lower revenues some communities are trying to circumvent the consequences of Prop. 13 by imposing ''user fees'' on tightly targeted groups of taxpayers to finance such general services as sewers, parks, education and electric power.
The biggest beneficiaries of Prop. 13 were not homeowners but businesses. The law curtailed assessments on all property, not just homes, and there is considerably more commercial property than residential. According to the sociologist Clarence Lo, author of a forthcoming book on tax revolts, California homeowners received just one-third of total tax relief in the first five years under Prop. 13. A whopping 57 percent of benefits went to owners of commercial and industrial property.
Insofar as Prop. 13 did benefit homeowners, it did so by picking the pockets of people buying houses. Since the latter tend to be younger and less affluent than those already ensconced, this isn't exactly progressive. Here's how it happens:
First, home buyers still get slammed on property taxes, because their rates are pegged to current land values. By contrast, folks who bought their homes before 1978 pay taxes based on their home's 1975 assessment, which can be hiked by no more than 2 percent a year. Since the median price of homes in California has doubled since 1978, the disparities between identical homes can now be huge. According to Jeff Reynolds, head of research for the state's Board of Equalization, pre-Prop. 13 homeowners pay one-quarter to one-third the tax rates of more recent home buyers.
The undemocratic effects of Prop. 13 go further. Starved for revenues, California cities have been aggressively hunting for new sources. They could raise rates, but that would be political suicide. They could stop repairing roads and schools, but that wouldn't be much better.
Their solution, instead, has been to charge vastly higher ''impact fees'' on new homes. Theoretically, impact fees cover the cost of new streets and sewers associated with new homes. When tax revenues financed these costs, impact fees were minimal or nonexistent. Since Prop. 13, though, they've been soaring. In 1983, they averaged about $5,700. By 1987, they had zoomed to $11,807, according to a survey by the National Association of Home Builders. On top of that, cities now frequently demand that developers also foot the bill for new parks and schools.
At first blush, this might seem fair: New home buyers pay for new infrastructure. In reality, it's a shakedown. If you combine higher tax assessments with sharply higher impact fees, the upshot is that newcomers, many of whom struggled mightily just to make their first down payment, are subsidizing public services for low-taxed landed gentry.
A more subtle effect of impact fees is to bias development toward more upscale housing. Why? Because in most cities the fee remains the same regardless of the cost of a house. Obviously, it's easier to roll $12,000 into a $300,000 quarter-acre home than a $100,000 starter.
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State repeatedly has raided cities, counties for money
By BRIAN JOSEPH, JAIMEE FLETCHER and VIK JOLLY
The Orange County Register
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SACRAMENTO – It was budget déjà vu last week as Gov. Arnold Schwarzenegger proposed fixing the state's fiscal problems by borrowing $2 billion from cities and counties.
Since the early 1990s, Sacramento has raided local property taxes three times to painful results. City and county officials in Orange County and across the state complain that the state's meddling in 1992, 1993 and 2003 plundered their reserves, crippled their services and pushed their finances to the breaking point.
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