When Jerry Brown returned to the governor’s office a couple of years ago, he said he wanted to unwind some of the effects of Proposition 13—California’s property tax law. Now that Democrats have won a supermajority in both houses of the legislature, the governor may get his chance.
California voters, fed up with rising property taxes, overwhelmingly approved Prop 13 in the late 1970s. The law sets taxes based on a property’s value at the time of purchase, and caps any tax increases at 2% a year. Those changes cost local governments the bulk of their revenue - and led to a state takeover of school funding and other programs. Critics often call the passage of Prop 13 the beginning of California’s deterioration. But Governor Brown won’t say whether he’ll use the Democrats’ new supermajority to tackle the law.
“I might say the gold rush was the beginning of our problems.” Brown joked at a press conference following the election. “Maybe it was Juan Cabrillo when he showed up in 1542… I think you might want to go back to Genesis.”
Economist Chris Thornberg calls Brown's "a savvy negotiator" who knows to keep his cards close to his chest on any changes to Prop 13. “Trust me when I say this is clearly on the mind of everybody in Sacramento. I’ve been up there talking to him about it.”
But even with enough Democrats in the state senate and assembly, to place a measure on the ballot to modify or repeal Prop 13, it won’t be easy, says Max Neiman with the Institute of Governmental Studies at UC Berkekey. Neiman expects that some Democrats, who have to run for reelection in highly competitive districts, may not be willing to risk alienating the majority of voters who still favor the measure.
“It doesn’t take a rocket scientist to conclude that a frontal assault on Proposition 13 isn’t going to take place,” Neiman says. “The question then is what kinds of tweaking can you do that will have a significant effect.”
Neiman says the one tweak Democrats might try would be to raise tax rates on commercial property. “You can pretty well dramatically demonstrate in a lot of places that commercial property, because it turns over less frequently, has a declining share of the property tax burden.”
Neiman says that fact could be used to justify some sort of differential between residential and commercial property tax, to make it more equitable.
Sherry Bebitch-Jeffe with the USC Price School of Public Policy says that tweaking Prop 13’s corporate tax formula is the only change Brown could propose with a straight face. Even that, she says, would provoke many voters who just approved his Prop 30 tax initiative.
“The governor just went to the electorate for $6-billion plus in raised taxes. Do you think that the next thing he’s going to do is go after Prop 13?”
Bebitch Jeffe doubts “the people” will agree to raise their own property taxes.
UC Berkeley’s Max Neiman says that for all the criticism of Prop 13, most Californians prefer it to the way things were.
“Even when you point out to people the inequity of having two property owners with wildly different tax burdens—solely on the basis of when they bought their property--people still accept that as being an acceptable price to pay for the long-term protection against rising property taxes.”
Governor Brown has said he’d like to re-examine tax reform in the coming year. But instead of proposing specific changes, he’ll only say he’s not ruling anything out.