This Friday, June 6, marks the 25th anniversary of one of the most important political/economic events in American history: Proposition 13. This initiative, which was approved by the voters of California on this date in 1978, sparked a "tax revolt" that spread throughout the country and continues to reverberate today.
The impetus for Prop. 13 was the inflation-induced housing price boom of the 1970s. Investors seeking to preserve their capital poured their savings into tangible assets like real estate. With double-digit inflation also pushing up prices, many homeowners suddenly found themselves living in houses worth many times what they paid for them. But with property taxes based on assessed values, this meant that tax bills were also rising sharply. Since incomes were not rising as fast as prices or taxes, some California homeowners found that they couldn't pay the taxes and were forced to sell their homes.
Howard Jarvis and Paul Gann, leaders of two California taxpayer organizations, joined forces in 1978 to put an amendment to the state constitution on the ballot that would limit property taxes to 1 percent of assessed value in 1975. Valuations were frozen until the property was sold. And just to make sure that other taxes were not increased to compensate, a two-thirds majority in the legislature was required to raise taxes.
At first, California politicians ignored the Jarvis-Gann effort. But when polls showed that the measure would pass, they panicked. Dire effects were predicted if taxes were cut. Police, firefighters and teachers would all be laid off, voters were told. Unemployment would rise, and the state's economy would be decimated.
Lest you think I exaggerate, consider these quotes from an April 17, 1978, Washington Post story:
Former California Gov. Edmund G. (Pat) Brown: "If I were a communist, I would vote for Proposition 13."
Los Angeles Mayor Thomas Bradley: Proposition 13 will "hit the city like a neutron bomb, leaving some city facilities standing virtually empty and human services devastated."
Howard Allen, president of the Los Angeles Chamber of Commerce: Proposition 13 is "a fraud on the taxpayer that will cause fiscal chaos, massive unemployment and disruption of the economy."
Some economists at the University of California at Los Angeles predicted that the state's unemployment rate would rise by 4.5 percentage points, from a projected 6.7 percent rate in 1980 if Prop. 13 was defeated to 11.2 percent if it was enacted.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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