Rob Mitchell: What is Proposition 13?

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Proposition 13

By Rob Mitchell

In California Proposition 13 was promised to protect homeowners from sharp increases in their property tax bills. Proposition 13 was a multipronged attack designed to do two things: ease the overall tax burden and protect a stable culture of homeownership. To that end, it set tax rates at 1% of a property’s sale price and capped annual increases at no more than 2%. Then it required future tax hikes of any form to pass the state Legislature by a two-thirds vote. Not local representatives but the state legislature approved tax rate increases to property taxes.

Still, it’s hard for California to claim any sort of lasting victory on taxes or homeownership. Today, Californians remain among the most highly taxed people in the nation; low property taxes have been more than offset by increased income, sales, and gas taxes. That might not be so bad if Proposition 13 was thereby rendered a wash. But it’s not. Its effects are deeply regressive taxation and distorted local economies and housing markets.

 

 

Proposition 13 has made it harder, not easier, to become a homeowner. California has one of the lowest rates of homeownership (55%) in the nation, second only to New York and nine percentage points below the national average. The consequences of Proposition 13 have hit every generation following the baby boomers particularly hard. California is left with a housing shortage and not enough turnover in the real estate market. New homeowners face a much bigger property tax burden than their older, often wealthier neighbors. And the overall tax burden has been shifted to more heavily burden non property owners — increasingly Gen-Xers and millennials who can’t afford to buy a house.

Housing development in California– particularly for people who earn low and moderate incomes – came to be seen as a drain on limited local revenues. Housing creates demands for public services like schools, public safety, water, sewage, parks, and libraries. At a time when property tax collections from residential properties to local governments were reduced dramatically, affordable housing, which brings in the lowest tax revenues, didn’t find much appeal from local leaders. When it came time for localities to decide how to use land, the reduction in the ability of local governments to raise revenue through property taxes, along with the drain on the coffers of low-priced housing, many decided providing public services would cost more than what residential property taxes could bring in. Fees were imposed on new development, and retail trade, which generated sales tax revenue, became increasingly popular. Officials prioritized auto malls, strip malls, and other commercial land uses. Should Tennessee follow this path? Does Tennessee want to make home ownership less available? Does Tennessee wish to remove local control of expenditures?

To be clear, words mean things. The language in the amendments to recent bills has included in its language which is Prop 13. It has in its language to consider options “not limited to a state property tax”. We need greater transparency in government. We need better communication of issues. We do not need more needless rhetoric and sound bites which 40 plus years of history and failed economic policies have caused Californians to flee to Tennessee.

Rob Mitchell serves as the Rutherford County, Tn Property Assessor. You can contact Rob at 615-898-8875 or Rutherford County Property Assessor.