When Proposition 13 went to the voters of California in 1978, it was as a result of crooked county assessors who “bent” the rules in property valuations to assist their friends, wealthy donors (assessors in California are, stupidly, elected officials) and, to some extent, in sympathy to elderly homeowners. Once those assessors were caught in their trickery the resulting property re-evaluations (mostly upwards, of course) caused a massive amount of voter anger.
The title of Proposition 13 was the People's Initiative to Limit Property Taxation and its main tenor was to limit property taxes to 1% of a property’s value per year. A formula allowed that value to be increased by 2% per year for inflation. The only ways that a base valuation could change would be at the sale of the property or after major additions or renovations (which you avoided telling the County Assessor’s office about). After a sale the transaction price becomes the new valuation base and is, again, only increased by a maximum of 2% per annum.
Proposition 13 passed with a majority of 65% to 35% with only two Counties voting no. Since 1978 the value of housing in California has increased considerably beyond 2% per year - but, just in case, if values went down in a slump, voters passed an amendment, (Proposition 8: numbering had started over again) in 1978 which allowed for a reduction in assessment values in a slump. That was triggered in 2009.
The initiative did a number of things. Positively, it protected home owners who were on fixed incomes. Negatively, it did a lot more: in our street in San José the percentage of rental property increased quite dramatically; our next-door neighbor, for example, owned three other houses in the street, and while he was able to easily increase rents in line with property sale value increases, his property taxes were, essentially, fixed. Other owners moved out of town, a lot retiring to sunny Nevada, but there was no incentive to sell their California house.
Over the years this has proved to be an incredible liability to the State. In the late 1960s and early 1970s, for example, California had the reputation of spending more per school student than any other State in the Union, and achieving stellar results. By the mid 1980s, California’s place in the table of student assessment had fallen to number 48.
Counties and the State have searched for and applied all sorts of other taxes and increases in existing taxes and fees to try and make up for the shortfall from property taxes. Sales taxes have steadily increased; ad valorem taxes on vehicles when you renew the registration have sharply increased into thousands of dollars (compare that to the flat $44 for three years that was in place in Oregon); excise taxes on companies have increased to $800 per year (compare, again, to Oregon’s $10 annual filing fee). Literally anywhere you have to pay money to the State or the County has resulted in fees; otherwise, services have just disappeared. Apart from the State prison system, funding for schools, fire departments, libraries, universities, community colleges, etc. has taken a dive, with personnel layoff notices in all sectors. When you cannot get a cash tax refund from your State but, instead, are sent an IOU, you know that things have reached breaking point.
Proposition 13 may be the underlying problem, but California State legislators are unwilling to bite the political bullet in antagonizing voters to try and raise the necessary two-thirds to change the situation. Governor Arnold Schwarzenegger will, no doubt, leave Sacramento with considerable relief, and some glee, after the November 2010 elections: wishing the best of luck to his successor as he hands off this knotty problem.
Wonderful ideas for new revenues, like legalizing marijuana under license, are quite likely to win out (having the side effect of allowing law enforcement agencies the time to focus on some real crimes), but one of the latest ideas does come across as more than a little crazy: digital license plates on vehicles.
The general idea is that a vehicle would display a normal plate when moving, but after four seconds at rest it would change to a digital advertising display. There is various talk of sharing revenues with the vehicle owner, allowing the owner to select the advertisers being shown, or of allowing opt-outs from advertising in return for even higher vehicle licensing fees.
The California DMV is being authorized (by a bill that has not received any opposition) to talk with a San Francisco company called Smart Plate who supposedly have a patent on a suitable technology but no prototypes to show. I could not find a web site associated with such a company, and the name is unfortunate: there is a trademarked Smart Plate from Hurst Chemical which is an assistant to printing, and there is a Swedish Smartplate that provides an automated pull-down cover for your license plate that can be enabled to prevent cameras from identifying your vehicle.
California has a budget shortfall of $19 billion and revenue ideas are no doubt very welcome. But if you think, as I do, that mere cell phones are a disturbance to driving...what about this kind of distraction at red lights, or for that matter on the daily commute? Wait, was that special offer from Wendy’s $1.29 or $1.39? Just a little closer...
