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On Prop 13 -- Time to Amend and Correct

Posted: 05/06/10 05:35 PM ET

Proposition 13 has been an unmitigated disaster for California. A serious dialogue about amending this out-of-date roadblock to restoring the state's fiscal health is long overdue. In a single generation, we've witnessed the crippling deterioration of public institutions and services due to widespread anti-tax sentiment and misguided support for Prop 13. Policies that might have once sounded reasonable have turned tragic for the vast majority of us.

Those who defend Prop 13 need only look at the current state of our fire and police departments, roads, libraries, health care system, and schools and universities to conclude that it's time for a change. We must raise our voices to curb self interest in favor of the greater common good -- and hold legislators accountable to that same commitment. It's time for those of us that can afford to pay higher taxes to do so, and it's time to amend and correct Prop 13.

Make no mistake, the so-called "People's Initiative to Limit Property Taxation" has wreaked havoc since long before the current recession. The decline in the quality of life in California can be traced to Prop 13's passage on June 6, 1978, and the resulting cap on property tax rates statewide -- reducing vital municipal revenue by an average of 57%. The catastrophic effects of Prop 13 have played out in a particularly shameful way for California's public education system, which has plummeted from #1 -- the pride of the nation -- to close to the bottom.

Take UCLA as an example of what should be seen as an investment delivering a solid return for taxpayers -- every $1 invested generates almost $15 in economic activity, creating a $9.2 billion impact on the greater Los Angeles region and a $9.7 billion boost statewide. The numbers tell a compelling story: UCLA is a powerful economic engine and a center for technical, scientific, social, and cultural advancement. However, years of budget cuts to higher education have put those assets at serious risk. We can't abide that.

A major contributing factor to passage of Prop 13 was the sentiment that older Californians should not be priced out of their homes through high taxes. In fact, the proposition's unintended consequences have introduced inequity and inefficiency into the state's tax structure, and have hurt California property owners of every age by diminishing the state they call home.

It's frightening to see fear and greed pitting communities against each other, and divisive tactics promoting self-interest over the common good. As an ethical and moral imperative, the common good is central to the enduring success of society, and can be succinctly described by the Golden Rule -- doing unto others as we would wish done unto ourselves.

It's time to stop kidding ourselves and support a community dialogue to amend and correct Prop 13. Options to be explored include:

  1. Returning to a modified market value system for property tax assessment, eliminating the inequity between short and long-term property owners.
  2. Introducing a "split roll" that would keep tax rates the same for individual homeowners, but would close the business loophole.
  3. Instituting a phased property tax increase of one-tenth of one-percent annually for 15 years, at the end of which property taxes will be back to 1.5%--but without sudden, shocking results.

While many public-private partnerships have emerged to pick up some of the slack caused by Prop 13, private philanthropic dollars can only complement or catalyze public dollars -- not replace them. Ultimately, it is the responsibility of local and state governments to fund the public infrastructures that facilitate commerce, help create and sustain a middle class, and educate our workforce to keep us competitive in a global economy. This is the foundation of our future. But here's the big rub: Prop 13 has choked funding for local and state governments to the point of starvation, and it's hard to think clearly when you're starving.

As an active funder of cultural arts and social services in California and the nation, I care deeply about the welfare of all Californians. We must elect legislators that are willing to take on this difficult task, and change a bad luck proposition into the good fortune and promise for which the Golden State has always stood.

David C. Bohnett is founder of the private equity firm Baroda Ventures, chairman of the David Bohnett Foundation, and funder of numerous California and national social justice programs, including David Bohnett Leadership Programs at UCLA's School of Public Affairs, NYU's Robert F. Wagner Graduate School of Public Service and at Harvard's Kennedy School of Government.