Proposition 13 was the “biggest tax revolt” in California’s history.
KPBS San Diego did an interesting piece on raising taxes in California and Prop 13’s effect on this.
Thirty-two years ago, Californians en masse went to the polls and approved the largest tax-limiting legislation in recent history. Basically, it limited the property taxes that could be assigned to a property.
In response, many municipalities responded by building more hotels, retail, and more while limiting the amount of houses (municipalities earn more money from sales and occupancy taxes than on property tax). This leaves the state perpetually building too few houses, and worse, restricting adaptive reuse of residential real estate into higher density because of the reassesment rules.
Personally, there are 3 major qualms I have with Prop 13.
1. This is not a homestead exemption, so it does nothing to favor homeowners over landlords (who already have strong incentives through. This is landlord welfare.
2. Commercial properties are not exempted (they have a fixed base as well). This is fundamentally flawed, since it favors property-owning companies who lease as their primary business. This is corporate welfare.
3. There is no means test. Millionaires have the same exemptions as indigent elderly. This is welfare for the rich.
Unfortunately, taxpayers were sold that little old ladies were getting kicked out of their homes. While this is true, we could avoid the landlord, corporate, and rich welfare by instituting some changes to the original proposition.
Instead, we have serious imbalances because cities favor not building homes unless they have significant Mello-Roos attached to them, allow corporate transfer of assets to perpetually avoid reassesment, and allows non-citizens and non-tax payers of California to receive the benefits of everyone else’s pain. How do you feel about prop 13?
The money shot for me?
RAND (Caller, La Jolla): Thank you for taking my call and thanks for this discussion. I would just like to put two issues on the table. The main one is something that really shocks me, never comes up in these types of discussions, which is the distinction between commercial properties and homes. Of course, nobody wants homeowners to be taxed out of their homes but Prop 13 also holds down the property taxes paid by shopping malls, office buildings, all kinds of commercial properties. And they have a loophole that homeowners don’t have, which is that they can sell the holding company that owns the property and then someone else can take ownership of that property but, theoretically, it hasn’t changed hands, just the company has changed hands. And so there’s many commercial properties in the state that have not been reassessed for many years and they’re not paying the cost of the essential services that they need to stay in business. And I think that that aspect of Proposition 13 is very unfair and needs to be changed.