On June 6, Californias Proposition 13, which imposed tighter rules on property taxation in California, turned 40. Polls show it has remained popular since getting 64.8 percent of the votes cast in 1978. But many have spent the ensuing four decades blaming it for every state and local fiscal pinch, every citizen complaint and every government good deed left undone. Whatever the problem, someone has asserted Proposition 13 caused it by gutting government revenue.
Prop. 13 has been blamed for unsolved kidnappings, murders and car thefts, library and education cutbacks, insufficient teacher pay, poor school performance, pothole problems, fee hikes, increased racial and demographic tensions, too much commercial development, increased road congestion and pollution, ad infinitum. However, those attacks have always hinged on the premise that Proposition 13 has decimated government funding. And that premise, although everybody knows it, has long been false.
The most commonly cited data used to support blame 13 arguments has been that state and local taxes per $1000 of personal income fell after Prop. 13. But such data cannot prove Prop. 13 gutted state and local revenues, because they do not measure whether the government has shrunk. They measure the share of Californians income going to the various levels of government. But the argument rests on its continued reduction of the real amount of government resources available per resident. In a growing economy, even if the governments tab shrank as a proportion of citizens total incomes, it could still command substantially more resources per citizen.
A better measure is data in real per capita terms. Such measures adjust for both population change and inflation, so that they measure the real level of resources available to the government per resident. A government with constant real per capita revenues or expenditures should be able to maintain the same level of services per citizen. If fewer services are being provided, government is becoming less productive and/or shifting resources elsewhere. And real per capita measures show far from Scrooge-like patterns.
A second major failing of the tax data usually cited against Prop. 13 is that, as anyone having extensive dealings with Californias various governments can attest, taxes are far from the only way our government siphons resources from its citizens. In fact, tax measures omit what became by far the fastest growing source of government revenue after Prop. 13: charges, fees, and assessments (lumped into the innocuous sounding charges and miscellaneous revenue category). While not officially called taxes, these have the same effect on citizens pocketbooks. Any accurate assessment of whether Prop. 13 imposed a fiscal tourniquet on state and local revenues must include these sources, not just taxes.Examining real (inflaton-adjusted) state and local revenue and expenditure per capita trends reveals that California had already passed its pre-Prop. 13 peaks by 1989. By 1990, real per capita expenditures for welfare, police and fire were higher than their pre-Prop. 13 peaks, and education was only slightly lower. These facts make it impossible to honestly blame Prop. 13 for every fiscal problem of the past quarter-century. And that is still before counting the burdens of regulation in Americas notoriously least friendly regulatory regime, estimated to be around half a trillion dollars annually.
Those who want the government to take even more from Californias taxpayers, as with Novembers ballot initiative that would raise billions each year by creating a split roll property tax, which would eliminate Prop. 13 protections for commercial properties (a prospect which shared the ballot with Prop. 13 in 1978 as Prop. 8, which won only 47 percent of the vote despite widespread political backing). But Prop. 13 has been a bogus scapegoat for decades. California state and local governments command more resources per capita now than before it passed. If too little is accomplished with those resources, it is not Prop. 13s fault.
|Gary M. Galles is a Research Fellow at the Independent Institute, Professor of Economics at Pepperdine University, and Adjunct Scholar at the Ludwig von Mises Institute.|