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Close the Loophole

If you are as fed up as I am with California’s dysfunctional budget and tax system (not to mention the roadblocks in the legislature and our, ahem, “governor”) check this out: Close the Loophole.

This is a movement to set right the terrible problems created by Proposition 13 in California several decades ago. I’m not against reasonable control of taxation, but this thing has gone (predictably, I might add) out of control in a whole bunch of ways, including:

  • The tax burden has shifted from steady and predictable property taxes to unreliable, variable, and regressive sales taxes and fees.
  • Because people (like me!) who have owned their property for many decades are locked in to much lower levels of property tax, next-door neighbors pay wildly different amounts of property tax.
  • The real beneficiaries of this proposition are huge commercial property owners in the state who don’t “turn over” their property and who now pay far less tax as a percentage to the state than they did before the proposition was enacted – and this trend will continue indefinitely and push a greater and greater percent of the burden onto individual homeowners.

Proposition 13 was a brilliant political calculation. It contained features that raised its short term appeal high enough to get it passed, it was offered at a time of great taxpayer anger, it pandered to citizen’s baser instincts and its passage made discussion of any changes the “third rail” of California politics – to go there was political death. But is also locked the state into a downward revenue spiral that continues to get worse and worse. But it has now become so painfully obvious that California’s system is badly broken – that groups such as Close the Loophole now have a chance of provoking much-needed change – and they need support from all of us now.

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July 3, 2009 - Posted by | Commentary

3 Comments

  1. I am one property owner who is in favor of dumping or seriously reworking Prop 13 and I have been in my little house since 1992! I would like to see the fairness put back into the system so new homeowners aren’t slammed by their property taxes and also so that corporations and business carry their fair share too. California use to be the Golden State and it was. Now it’s just an old rusty tin can Arnold is kicking down a dusty old dirt road. I’d like to see California be the Golden State again and I certainly don’t expect that to come for free. Nice things after all, cost money!

    Comment by cynthialeeder | July 3, 2009

  2. I’m vehemently against additional taxation, but prop 13 is just horrible policy and needs to go.
    Spending and revenue items should be made by the legislature- not by referendum vote. We have a representative democracy for a reason.

    Prop 13 is a classic example of Tyranny of the Masses- where the majority (CA homeowners) push the tax burden onto the minority or disenfrancised (those who do not yet own CA property). It has created inefficiencies in the CA housing market and contributed to the CA housing bubble.

    At the very least, it should not apply to commercial properties. It is completely absurd that these were included in the proposition in the first place.

    And Cynthia, CA politics has substantial issues. Arnold is not among them.

    Comment by fedak | July 4, 2009

  3. Thanks to both of you for your comments. There is an interesting analysis of how prop 13 was pushed and by whom back when the original vote took place – follow the link to the Close the Loophole post in my article and you should be able to find it.

    I’ll agree part way with fedak about Arnie. I think he is more a symptom of the problem(s) than the actual problem itself, though I believe he has squandered a rare opportunity to be the one to begin to fix this mess. When he came in to office, for a brief moment he had the bully pulpit and people on both sides of the political spectrum were willing to give him the benefit of the doubt in a way we had not seen for many years – at least since before Reagan. I’m a confirmed liberal, I thought that the recall was just as big of a con job as proposition 13 was, and I was angry when Arnie came into office – I couldn’t believe that Californians were buying this nonsense. Then Schwarzenegger began to speak in conciliatory tones and to take some actions that drove things back toward the center. (Although I’m liberal, I can live with a balanced, centrist approach.)

    But then his navigation system seemed to develop a major bug. He would sometimes hard left positions on the environment (and occasionally on education) but then reverse course and swing wildly right. In the end he lost the respect of politicians and the public on both sides. One of his major problems now is that he has no political base. While he is a Republican, he has far more luck getting Democrats to move from their initial positions than he has getting the Republican minority to budge an inch from its intransigent position. In fact, the politicians on the right more or less ignore him. If there is one thing that a governor must be able to do in order to govern, it is to marshal the forces of his own party behind his initiatives. If there is a second thing, it is that he must be a good “horse trader” in order to build a majority consensus around positions that can pass legislative votes. He can do neither.

    But that brings me to the real problems with California politics. I’ll just make a list w/o much explanation since I’ve gone on too long already:

    Proposition 13 has locked the state into a financial “death spiral” in which the tax burden shifts from a strong and balanced property tax base that worked for decades to one in which individual homeowners pay an increasingly large portion of the property taxes and corporate taxpayers pay less and less, and to compensate the state relies more and more in unreliable and regressive types of taxation such as fees and sales taxes.
    A long history of (more than typically) politically motivated redistricting has locked-in the most extreme politicians in Sacramento at the expense of those who know how to legislate, compromise, and govern.
    The requirement for a 2/3 approval of the budget by both houses has led to a permanent tyranny of the minority – and the current situation is the textbook example of where this leads, especially in combination with the bullet directly above this one. This is as anti-democratic a situation as can be imagined, and in the long run it encourages the worst kind of paralyzing behavior by legislators.

    Stepping down (for the moment) from the soapbox,

    Dan

    Comment by Dan Mitchell | July 4, 2009


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