THE BLOG

Aspects of Proposition 13 Simply Must Be Reformed to Save California

08/19/2009 05:12 am ET | Updated May 25, 2011

In last week's column, I referred to one of the problematic aspects of the "People's Initiative to Limit Property Taxation," more commonly known as Proposition 13, citing it as contributing to California's ongoing deficit challenges. In doing so, I received a plethora of e-mails and phone calls accusing me of advocating that seniors lose their homes.

It has long been considered the third rail of California politics; the emotion that surrounds it provides a fortress of invincibility. But Prop. 13 in its present form is one of the major impediments to the state finding answers to its seemingly intractable financial problems.

The portion that most people associate with Prop. 13 is Section 1(a): "The maximum amount of any ad valorem tax on real property shall not exceed one percent (1 percent) of the full cash value of such property. The one percent (1 percent) tax to be collected by counties and apportioned according to law to the districts within the counties."

I suspect this is why Prop. 13 received 64.8 percent in support, winning in all but three counties statewide in 1978. But Prop. 13 did more than place a cap on property taxes.

Imagine momentarily that instead of Prop. 13, there were independent propositions: 13 a, b, and c.

Prop. 13 (A) Represented the cap on property tax previously mentioned in Section 1. I suspect, given the results, A would have passed as a stand-alone proposition.

What about B?

Prop. 13 (B) Represented the corporate loophole that a corporation owning commercial property (such as a shopping mall) is sold or merged, but the property stays technically deeded to the corporation, ownership of the property can effectively change hands without triggering Prop. 13's provision that fixes the amount of tax based on the property's resale value.

In other words, a $300,000 home purchased in California after Prop. 13 in all likelihood pays a substantially higher tax bill on a per-square foot basis than the Capitol Records building in Hollywood though ownership has technically changed hands since Prop. 13 passed -- a provision not available to smaller property owners. Would you have voted for B?

Prop. 13 (C) would require a two-thirds majority of the Legislature to raise taxes of any type unrelated to the cap on property tax mentioned in A. Would you have voted for C?

Alas, there was no Propositions 13 a, b, and c. Just one all-inclusive proposition.
Most members of Legislature know the B and C aspects of Prop. 13 are problematic for the state but the emotion surrounding A won't allow for a judicious conversation to take place.

But by simply closing the Prop. 13 corporate loophole could potentially bring an additional $5 billion in revenue.

Moreover, California has the lowest bond rating in the country in part because Prop. 13's two-thirds requirement creates a logjam in the Legislature, which makes Wall Street skittish about whether the state will pay its debts as the current IOUs and furloughs bear witness.

The ability to raise revenues without the two-thirds majority paid for the infrastructure that was once the gold standard for the nation, but is now crumbling before our eyes.

It is not true that California must keep the two-thirds majority vote in the Legislature and the corporate loophole in order to maintain the aspects of Prop. 13 that most find popular. This is the lasting genius of Prop. 13 author Howard Jarvis and the challenge presented to those who wish to reform it.

Since the California electorate enacted it, there is no way to address the unintended consequences, allowing Prop.13 to live in perpetuity. Jarvis managed to morph public policy with urban legend creating an opposition to change based on one part fact and two parts emotion.

I am truly sympathetic to the fears many possess around Prop. 13. But allowing aspects of the proposition, detrimental to the state, to continue unfettered cannot be the remedy by which those fears are assuaged.

I would like to believe there is a way to keep seniors in their homes by maintaining the existing caps on property tax, alleviate the two-thirds vote requirement in the Legislature to raise revenues and close the corporate loophole. A daunting task indeed.

But as long as the public views Prop.13 simply as a cap on property tax and nothing more, we'll never find out.

Byron Williams is an Oakland pastor and syndicated columnist and blog-talk radio host. He is the author of Strip Mall Patriotism: Moral Reflections of the Iraq War. E-mail him at byron@byronspeaks.com or visit his website: byronspeaks.com