[This commentary responds to a column in the San Jose Mercury News by philanthropist and technology entrepreneur David Bohnett titled, “How California voters can update, improve Prop. 13.”]
By David Kline | David Bohnett wrongly claims that local governments are “starving” for funds because of the property tax reforms approved by voters in Proposition 13.
The truth is that not only did Proposition 13 solve the problem of runaway property tax increases on homes and businesses, it also made the property tax a stable, growing source of government revenue.
Since the passage of Proposition 13, assessments have grown at an average rate of about 7.07 percent per year statewide. This outpaced inflation, which grew at an average annual rate of 3.57 percent, and population, which grew at an average rate of 1.43 percent.
Santa Clara County provides an excellent illustration of how property taxes have grown. The value of taxable property in the county was $450 billion in 2017 – a healthy 7.37 percent increase over the prior year – according to the most recent figures.
The value of Santa Clara County’s assessment roll is now an amazing 458 percent higher than it was in 1990. This translates to more revenue for local schools and government services.
(Although Bohnett discusses University of California funding, the UC system doesn’t receive property tax revenue, so it wasn’t impacted by Proposition 13. UC funding comes primarily from tuition and the state’s general fund, which will have a total reserve balance of nearly $16 billion under Governor Jerry Brown’s latest budget proposal. The governor proposed a 3 percent budget increase for UC in his budget, and noted that “since the end of the Great Recession, the University of California has received $1.2 billion in new funding and the California State University has received $1.6 billion.”)
While property tax revenue grows impressively, individual taxpayers are protected from unexpected tax hikes. Under Proposition 13, every property owner is taxed at 1 percent of his or her property’s assessed value (plus an amount to repay any local voter-approved bond debt, where applicable), and there is a 2 percent cap on how much the value can increase each year.
Under Proposition 13, all property owners know their property tax burden not just this year, but every year into the future. This certainty didn’t exist prior to Proposition 13, so homeowners and business owners often would be surprised by huge increases in their taxes from year to year, based on factors like whether neighbors remodeled their homes or businesses.
Does Proposition 13 have a “loophole” that benefits some property owners over others? No. The initiative applies equally to all property owners, and this equal treatment also was the law prior to Proposition 13.
Considering that California already is losing jobs to other states – in one recent example, a company that makes batteries for electric vehicles took its green jobs to Kentucky, of all places – we can’t afford to put more jobs at risk by making our tax structure even less competitive.
Proposition 13 has created a reliable source of local government funding, even while protecting taxpayers. The landmark initiative doesn’t need to be “updated” or “improved,” it just needs to be protected from those who want to raise taxes even when the government has surplus revenue.
David Kline is director of communications and research for CalTax.