Let’s Talk About Proposition 13

0
447

During the 1970s, as California became a global leader in business, the arts, and education, and homeowner groups organized to fight development, the value of property increased dramatically. Working-class people and retirees who owned their homes were unable to afford the property taxes assessed on their new values. A movement funded by national business groups and the emergent Goldwater/Reagan New Right created a ballot initiative, Proposition 13, which was passed by voters in 1978. It rolled property taxes back to 1975 levels, limited increases to 2% each year, and capped taxes at 1% of the assessed value, keeping people in their homes.

However, programs funded by property taxes were gutted, especially public schools. California went from ranking in the top ten states in spending per student to the bottom ten, and it has taken decades to restore most of the lost funding and services.

With property tax revenues drastically reduced, cities were forced to rely more on sales taxes. This made them dependent on businesses rather than residents, and specifically on retail, which rarely creates living wage jobs, much less ones which could support a person in West LA. If a city’s tax base is overwhelmingly business, it creates a strong incentive to put the interests of businesses first and to reserve a seat at the table for the Chamber of Commerce. If the city’s economic base is businesses who rely on minimum wage labor, the city is less likely to support a higher minimum wage, or protect workers from exploitation.

The City of Santa Monica depends heavily on hotel taxes, so, when COVID hit in early 2020, they anticipated at least one summer without those revenues and adopted a 2020-21 budget which halved funding for libraries and the Office of Sustainability and the Environment and disbanded their Department of Cultural Affairs, assigning some of its staff and projects to other departments and eliminating others. This was a direct consequence of Prop. 13, because although median home prices in Santa Monica seriously dipped at the start of the pandemic, they recovered within a year. If Santa Monica had been able to budget based on projected property taxes instead of projected hotel taxes, the cuts would not have been necessary.  

Property tax is paid only by those rich enough to own property, and property is itself a money-making asset, while sales tax is paid by all consumers, even by unhoused people. This is a good illustration of the difference between equality and equity. The sales tax is equal: everyone pays the same rate, but it is not equitable, because that 10% surcharge has more of an impact on those who have less. A flat tax appears fair, but it is actually regressive, since a dollar matters more to someone who has $10 than to someone who has $100.

In Paradise Lost: California’s Experience, America’s Future, former Sacramento Bee editor Peter Schrag argues that Prop. 13 led cities to raise and create fees to help compensate for the loss of property tax revenue. This included developer and permitting fees which exacerbated the housing shortage which had contributed to the inflated property values that made Prop. 13 appear necessary.

Municipal bonds are another way cities have attempted to fill the gaps created by Prop. 13. Proposition 46 in 1986 allowed California cities to issue general obligation bonds to fund the acquisition and improvement of real property, and in 2000 Prop. 39 lowered the threshold for their passage from ⅔ to 55%. There were 88 local bond measures statewide in 2002, which appears to be the last time someone counted, and over ¾ of them passed. Members of this Club have voted overwhelmingly to endorse the Culver City school facilities bond measure which will be on the March Primary ballot. 

Schrag also identifies Prop. 13 as an early and severe example of what our Treasurer Cynthia Hart calls “ballot box budgeting.” The proliferation of ballot initiatives limiting or mandating spending has created significant obstacles to California’s elected government setting and enacting policy. Since the 1930s the state constitution required a ⅔ legislative majority to adopt a budget or pass appropriations, except for schools, but Prop. 13 expanded that to cover most tax increases and to apply to local governments. This gives any group that can organize 34% of representatives or voters a veto, making major initiatives difficult even when Democrats hold every State office and legislative majorities. Tax cuts and exemptions, however, could always be passed by a simple majority.

Howard Jarvis, the leader of the movement for Prop. 13, was a former head of the Los Angeles Apartment Owners Association, the precursor to the Apartment Association of Greater Los Angeles. Prop. 13’s benefits to homeowners were dwarfed by its benefits to corporate property owners. Property is reassessed when it is sold, and few homes are owned by the same people as 45 years ago, although Schrag notes that subsequent legislation has added what he calls a “dynastic” provision allowing owners to pass their Prop. 13 benefits to their heirs. 

Corporations may be people according to the Supreme Court, but they are potentially immortal. The residents Prop. 13 prevented from being taxed out of their homes are long gone, and many of the new owners of those properties are paying property tax based on recent assessments, but the corporations surviving from 1978 are continuing to reap massive financial benefits, which come out of state and local budgets. The Howard Jarvis Taxpayers Association boasted in 2009 that Prop. 13 had “saved” taxpayers over $520 billion dollars. That was essentially a regressive tax credit. While the benefits of Prop. 13 always went primarily to the largest companies, this has increased because homes change hands more frequently than commercial property, and these benefits came at the public’s expense, while school budgets were trimmed to the bone and infrastructure allowed to decay. 

Prop. 13 prevented Jerry Brown from pursuing an ambitious and visionary agenda in his second term as Governor, because the State needed to bail out cities to preserve essential services. Without Prop. 13, California’s public schools would have maintained their quality throughout the ’80s and ’90s, and the State would have had billions to invest in transit, higher education, social services, clean energy, etc. If we accept the premise that Prop. 13 was intended to keep elderly and working-class Californians from being taxed out of their homes, we could see this as a necessary and unfortunate trade-off: investment in the future needs to be modest in scale to avoid doing harm in the present, but this trade-off was bogus. Immediate and lasting damage was done to schools, libraries, etc, and the benefits overwhelmingly went to corporations such as PG&E and Disney.

There was an alternative to Prop. 13 on the 1978 ballot: Proposition 8, placed there by the State Legislature. It would have allowed cities to create “split roll” systems, where owner-occupied residences would be taxed differently from businesses. This required an amendment to the State Constitution, so it could not simply be passed by the Legislature and signed by the Governor. 

The campaign against Prop. 8 made three arguments. First, they appealed to greed. Prop. 8 would not cut taxes as much as Prop. 13; for a lower tax bill, 13 was the better choice. Second, they appealed to distrust of government, claiming Prop. 8 was not credible because it was produced by the institutions that created the problem it claimed to address. More explicitly, Howard Jarvis had said Prop. 13 was intended to “put a hot rod up the butts of those damned stupid politicians.” Prop. 8 would not have done that. Third, they took advantage of journalists’ traditional aversion to calling a lie a lie. Jarvis claimed an anonymous source at the IRS had told him Prop. 8 would have ended the Federal income tax deduction for mortgage interest. Not only did Prop. 8 not do that, but individual states do not have the power to modify Federal tax law. Imagine what Texas and Florida would have done if this was an option. 

Split roll returned in 2020 with Prop. 15, supported by this Club, Eric Garcetti, Joe Biden, Cory Booker, Bernie Sanders, Elizabeth Warren, Karen Bass, Dolores Huerta, the teachers’ and nurses’ unions, SEIU, AFSCME, the PTA, the Sierra Club, and essentially the entire liberal and progressive community except for Willie Brown, who joined Pete Wilson, assorted business groups, and state and local Chambers of Commerce in opposition. It lost by 3%, with the well-funded opposition spreading Jarvis-style disinformation that it would raise taxes for homeowners.  

In State of Resistance: What California’s Dizzying Descent and Remarkable Resurgence Mean for America’s Future, USC sociologist Manuel Pastor describes Prop. 13 as a prototypical “racial proposition,” like 1994’s Prop. 187, which would have denied social services to undocumented Californians, 1996’s Prop. 209, which banned affirmative action at public universities, and 1998’s Prop. 227, which limited bilingual education. Howard Jarvis was active in the far-right John Birch Society. 

Dismantling the public sector was not an unintended consequence of Prop. 13; it was an important part of its appeal. In 1977, to comply with the State Supreme Court’s ruling in Serrano v. Priest, the state legislature had passed and Jerry Brown signed AB65, which succeeded where Jesse Unruh had failed in 1963, empowering the State to redistribute property tax revenues from richer areas to poorer ones in order to equalize school funding. This meant that property taxes were no longer an investment in local schools. White people became a minority in California shortly before the passage of Prop. 13, and homeowners, who were mostly white because of redlining, restrictive covenants, and racial income inequality, were susceptible to appeals that their rising taxes were going to pay for services for people who were not part of their California dream.

This dog whistle frequently became audible. Jarvis warned of Mexican immigrants coming to California “to get on the taxpayers’ gravy train,” and claimed that African Americans did not support Prop. 13 because many of them were “moochers and loafers” with government jobs. 

Prop. 13 was an important step in retracting the promises of the New Deal and the social progress of the ’60s, a reactionary backlash which went national with the election of Ronald Reagan in 1980, as Rick Perlstein recounts in Reaganland: America’s Right Turn, 1976-1980. Toni Morrison described this as a shift in language from “citizens” to “consumers” and “taxpayers,” which continues in the ubiquitous use of “stakeholder.” Rather than considering taxes as supporting the common good, in which we all have a stake, they are seen as a fee for services. This tracks with Margaret Thatcher’s famous dismissal of the existence of a common good: “there’s no such thing as society. There are individual men and women and there are families” and Ronald Reagan’s insistence in his 1981 inaugural address that “Government is not the solution to our problem, government is the problem.” It is challenging, if not impossible, to separate the anti-communitarianism from the xenophobia, the selfishness from the racism.

After school funding was centralized by AB65, then property taxes cut by Prop. 13, communities organized to privately fund services. This is the origin of the Culver City Education Foundation, the Friends of the Sandy Segal Health Center, the Friends of the Culver City Public Library, and similar groups across the state. At the same time that we appreciate these groups’ contributions, we need to recognize that they are a privatization of the public sector. They would not be necessary if we were willing to collectively invest in the commons. They relocalize funding, restoring inequity. For example, while the Los Angeles Public Library has a Library Foundation that serves the entire system, they also have Friends groups that support individual branches. This allows users of the Brentwood location to fund services for themselves beyond what is available to users of the Vernon one. This is the breach of the social contract Morrison described: rather than an investment in the collective good, supporting public services is seen as a way to enhance the value of the taxpayer’s property and to maintain or elevate their and their children’s class position. As Billie Holiday said: “Them that’s got shall get. Them that’s not shall lose.”

Public disinvestment in public services also creates a situation where, instead of being taxed fairly on property and profits, corporations and the rich can purchase good will through donations. If you went to the Montgomery Burns Museum of Art, saw the symphony at Burns Hall, played in Burns Park, got a Burns Scholarship to Burns College, studied in the Burns Library, or relaxed in Burns Plaza, you will be less likely to support a strike at Burns Corp., fight Mr. Burns’ plan to build a nuclear waste storage facility in the middle of town, vote against his chosen political candidates, tax Mr. Burns’ capital gains at the same rate as his employees’ wages, base his Social Security contribution on all of his income rather than the first $250,000, and so on. It doesn’t take much for oligarchs to be seen as benefactors rather than predators. Sometimes a frozen turkey is enough. The wellbeing of society should not be contingent on this largesse. 

I was ten years old in 1978. My father was nearing the end of his first term on the Culver City School Board. As I was entering Junior High, excited about being able to choose from a variety of subjects and teachers and to begin planning for college and a career, he voted for the post-Prop. 13 budget, which eliminated many of those options and services.

Jerry Brown embraced austerity after the passage of Prop. 13, invoking the two worst political trends of the moment by calling himself “a born-again tax cutter.” Brown is a complicated character who has balanced populism, iconoclasm, and self-promotion throughout his career. Jerry’s full name is Edmund Gerald Brown Jr. His father, Edmund Gerald Brown, known as “Pat,” had been Governor from 1959-1967, during which he led the creation of the infrastructure which supported California’s growth, from the freeways to the universities, earning the title of California’s “master builder.” After Prop. 13 Jerry Brown moved away from proposing his own ambitious projects, such as the State space program which earned him the “Governor Moonbeam” nickname, and instead distinguished himself from his father through a fiscal conservatism that undermined his father’s work.  

Generalizations about generations are of limited value, but I propose that the cynicism and nihilism of Generation X came not simply from seeing the radical potential of the 1960s replaced by a polyester hellscape, but from witnessing the passage of Prop. 13 and the election of Reagan. Manuel Pastor called Prop. 13 “a declaration of generational warfare.” Boomers seemed to be actively working to deny us a future, and that was decades before most of us thought much about the climate. 

I don’t think I was ever mad at my father for his vote. He believed he had no other choice. My anger is reserved for the people who put him in that position: first the supporters of Prop. 13 and then the advocates of Culver City’s status quo, who convinced him and all the other decision-makers of the time that academics, arts, and counselors could be cut more deeply than sports. I grew up around this city’s liberal elected leaders, and I watched them repeatedly fail to support institutions that could have supported their children or younger versions of themselves. It took a long time after I moved back to LA for me to be willing to live in Culver City again, and it took a while after that for me to be able to stand to look at Culver City politics.

Again, I am not mad at them. I believe they did the best they thought possible. I blame the system that convinced them those limitations were natural or insurmountable. I entered politics because I saw alternatives in 2016. The campaigns of Bernie Sanders, Daniel Lee, Alex Fisch, and Kelly Kent showed me that it was possible to say that things could be different, that there is nothing hip about cynicism, and that we can demand better choices.