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Time to modify Proposition 13

 

The moment anyone in public life begins talking about changing Proposition 13, the landmark 1978 property tax-cutting initiative, they come under immediate attack from the Howard Jarvis Taxpayers Assn., which uses its vast mailing lists to arouse instant resentment against supposed transgressors.

So great is the intimidation factor that Proposition 13 has remained untouched for almost 33 years - and so have the far more dicey regulations adopted to implement it the year after it passed.

During that time, three new state university campuses have opened, six governors have come and gone, Proposition 13 author Howard Jarvis and his tax-protesting sidekick Paul Gann have died, freeways and ballparks have been built from scratch.

Eras have come and gone in politics, sports, entertainment and state budgeting, but there sits Proposition 13, with its mandate that no property can be taxed at more than 1 percent of its most recent sales price or 1 percent of its 1975 assessed value, plus an annual increase of no more than 2 percent.

Virtually no one of political significance or influence argues for a change in that basic formula for residential housing. After all, the main reason Proposition 13 passed was that home values were rising so rapidly in the '70s, when taxes were proportionate to market values, that low-income homeowners were being taxed out of their homes.

But the campaign for Proposition 13 barely mentioned commercial property, which is now a prime beneficiary of the measure.

Commercial and industrial properties are taxed using the same formula as homes, but while residential property changes hands an average of once every seven years here, commercial property is far less volatile.

And Proposition 13 assessment rules passed in 1979 let many properties evade the tax increases to which most homes are subject. If a merger occurs, property taxes can often remain stable. When apartment buildings are bought by limited partnerships, there is often no increase in property taxes unless a single individual holds a controlling stake in the new ownership.

When changes to these rules were first proposed by former Democratic state Sen. Martha Escutia, they were essentially hooted off the floor by lawmakers afraid of political electrocution.

Those rule changes could have raised $5 billion a year without impacting a single homeowner or existing business. Now, with the state's financial crunch much worse, and with universities, schools, parks, police, fire prevention and other public services being cut to the bone, it's time some things became fair game.

Some of the reported $41 billion held by special districts ought to be part of the solution.

The rules of what constitutes a change of property ownership also need another look. And it's high time to consider a "split roll" of property taxation, where commercial property is taxed at a higher rate than homes.

 

If California fails to make these moves we will deserve whatever epidemics, crimes, wildfire damage and other problems we get.