35 years after Prop 13, has it worked?

Article Highlights

  • Has California's Prop 13 worked, 35 years later?

    Tweet This

  • Have tax and expenditure limits effectively stopped government growth?

    Tweet This

  • Before Prop 13, CA gov spending grew at .7% per year. After, it grew at 2.4% per year.

    Tweet This

Today is the 35th anniversary of the passage of Proposition 13. The California ballot initiative limited the state’s property tax rates and transferred responsibility for allocating local property tax revenues to the state legislature — but did it yield an increase in fiscal discipline?

During the 1970s, California property values, and thus the assessments used to compute property tax liabilities, doubled in real (inflation-adjusted) terms. The political class, enjoying the resulting torrent of new property tax revenues, largely refused to reduce property tax rates. (The assessment times the rate equals the tax bill.) One enormous problem was that individual government agencies — school districts, flood districts, etc. — imposed their tax rates independently, and the total tax rate was the simple sum of all of the above. Any effort to exercise fiscal discipline was a collective good from the viewpoint of any given bureaucracy: a reduction in tax collections by one simply left more dollars on the table for others. In any event, then as now, the bureaucracy and elected officials had powerful incentives to respond to the demands of concentrated spending interests rather than those of diffused taxpayers, and, then as now, government spending was blandly assumed to accomplish much good, with or without the support of actual evidence.

And then as now, it was ordinary people who had to foot the bills, in this case skyrocketing property tax liabilities, too often by selling their houses. Yes, a significant number of people literally were being taxed out of their homes, many of whom were the elderly on fixed incomes, a rather perverse situation to which the central response of elected officials and the bureaucracy was… silence.

Up to the plate stepped Howard Jarvis, a man whose philosophy of public finance was simple: don’t give the bureaucrats and the politicians the money in the first place. The result was a voter initiative, Proposition 13, the official title of which was the People's Initiative to Limit Property Taxation. Notwithstanding the Pravda-like title, Proposition 13 was a constitutional amendment approved by the voters on June 6, 1978, by a margin of about 65–35.

Read the full text of the article on The American.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Benjamin
Zycher
  • Benjamin Zycher is the John G. Searle Chair and a resident scholar at the American Enterprise Institute (AEI), where he works on energy and environmental policy. He is also a senior fellow at the Pacific Research Institute.

    Before joining AEI, Zycher conducted a broad research program in his public policy research firm, and was an intelligence community associate of the Office of Economic Analysis, Bureau of Intelligence and Research, US Department of State.  He is a former senior economist at the RAND Corporation, a former adjunct professor of economics at the University of California, Los Angeles (UCLA) and at the California State University Channel Islands, and is a former senior economist at the Jet Propulsion Laboratory, California Institute of Technology.  He served as a senior staff economist for the President's Council of Economic Advisers, with responsibility for energy and environmental policy issues.

    Zycher has a doctorate in economics from UCLA, a Master in Public Policy from the University of California, Berkeley, and a Bachelor of Arts in political science from UCLA.

  • Email: benjamin.zycher@aei.org
  • Assistant Info

    Name: Regan Kuchan
    Phone: 202.862.5903
    Email: regan.kuchan@aei.org

What's new on AEI

image Recovering from tax time blues
image 10 welfare reform lessons
image Let HHS nominee Sylvia Burwell explain Obamacare lie
image Why bold ideas backfire in politics
AEI on Facebook
Events Calendar
  • 14
    MON
  • 15
    TUE
  • 16
    WED
  • 17
    THU
  • 18
    FRI
Wednesday, April 16, 2014 | 10:00 a.m. – 11:00 a.m.
Calling treason by its name: A conversation with Liam Fox

Join us at AEI as the Right Honorable Liam Fox sits down with Marc Thiessen to discuss and debate whether America’s intelligence agencies have infringed on the personal privacy of US citizens.

Event Registration is Closed
Thursday, April 17, 2014 | 4:00 p.m. – 5:00 p.m.
The curmudgeon's guide to getting ahead

How can young people succeed in workplaces dominated by curmudgeons who are judging their every move? At this AEI book event, bestselling author and social scientist Charles Murray will offer indispensable advice for navigating the workplace, getting ahead, and living a fulfilling life.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.