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Why Proposition 13 and Attacking It Are Both Popular

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Tags Big GovernmentBureaucracy and RegulationTaxes and Spending

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Felix Morley once called federalism “the distinctively American contribution to political art,” because of its potential to limit government’s ability to harm its citizens. Retaining powers not delegated to the federal government in the hands of individuals and states enabled easier escape from abusive government by “voting with their feet” for jurisdictions with less hostile governance, setting a tighter limit on government’s ability to impose burdens that outweighed benefits.

Government inefficiency and redistribution beyond what citizens support is a ubiquitous source of such burdens. But the more easily one can leave a jurisdiction, the smaller the net burden their government can impose before it drives citizens away.

It is generally less costly to leave an unattractive local government than a similarly repellant state, and less costly to leave a state than the country. Consequently, the less inefficiency and fewer unsupported policies a smaller government can finance.

To illustrate, if a local government imposed overly burdensome regulations or the state imposed overly burdensome sales and/or income taxes, relative to the goods and services they finance, you could often avoid them simply by leaving the jurisdiction.

But what if there was a type of state or local burden that citizens could not avoid by leaving? That would become the government’s go-to source for spending initiatives not actually supported by citizens, dramatically undermining voting with one’s feet power to protect them. It would also put protections against such government abuse near the top of honest reformers’ action items. Further, if their efforts paid off, the limits they put on such a source of government funds would also rise to the top of such governments’ (and those who want them to dole out more unjustified dollars in their direction) target list.

Property taxes are just such a burden. And that explains both why California’s Proposition 13 was so popular in 1978, and remains so today, as well as why it has ever since been under continual attack by governments and groups that want those governments to steer other people’s money their way.

Unlike other state and local government burdens, voting with one’s feet cannot avoid the burdens of jurisdictions imposing “abusive” property taxation. The owner of a property bears those burdens (as well as whatever benefits they finance) if they maintain ownership. If they sell the property, the present value of the difference between expected future taxes and benefits will be capitalized into their property’s sales price, and they still bear the burden, just in a different form. Even if they sell the property and move away, the same thing is true.

In the runup to Proposition 13, growing inflation was sharply raising property values in dollar terms. So, it was sharply driving up property taxes. But those extra burdens offered no guarantee the resources would be spent in a way that had greater benefits than costs in the eyes of citizens (if the likely benefits exceeded the costs, such higher taxes and the benefits they would finance would help homeowners, so they would support those initiatives). Many even worried about losing their homes as a result. The result was reform proposals to limit property taxes and government spending, with Proposition 13’s limits on property taxes and the imposition of new taxes (which passed with 64.8 percent of the vote) the most famous.

Virtually every major government “leader” and interest group already exercising power in California government opposed Proposition 13 because it limited the funding source for state and local spending citizens didn’t value enough to voluntarily pay for. And even though then governor Jerry Brown claimed to become a “born-again tax cutter” as a result, there has been an ongoing assault to erode or eliminate Proposition 13 by those in government and those who live off government.

I was remined of this by Dan Walters’s “Intellectually Dishonest Report Attacks Proposition 13 on ‘Equity’ Grounds,” in the Orange County Register. He noted a recent “study” alleging another way—supposedly racist—that “generations have been harmed by this policy.” Of course, that was on top of the unsolved kidnappings; murders and car thefts; library and education cutbacks; insufficient teacher pay; poor school performance; pothole problems; fee hikes; increased racial and demographic tensions; too much commercial development; increased road congestion and pollution; etc.; etc. That have already been blamed on Proposition 13.

That study jumped on the bandwagon of bogus reasons to oppose Proposition 13, which Walters called “guilt by chronological association,” even though it “cannot causally connect” Proposition 13 to the problems it is accused of causing. Of course, one reason is that real per capita state and local government spending—the most appropriate metric for government’s potential ability to provide a given level of services per citizen—has been higher than before Proposition 13 for roughly the past third of a century.

California’s government is far from being starved of resources, so it is hard to blame Proposition 13 for government failures to provide sufficiently valuable goods and services. Most revealing, however, is the report’s conclusion that it demonstrates the need to “overcome political and taxpayer resistance to changing Proposition 13 and other policies that constrain taxation and budgetary decision-making in California,” which translates into plainer language as “we want still more tax money to spend than California’s citizens believe is worthwhile.”

Both Proposition 13’s popularity and the long history of assaults against it derive from same fact—in the case of property taxation, voting with our feet cannot protect Californians effectively against property-tax-funded spending that provides us less in benefits than it drains from our pockets. That is why the conclusions every such attack reaches require close attention. When a host of false or misleading claims are all taken to mean citizens should be made to give government more money, they should all be suspect.

If we thought the spending was worth the money, we would already support it. We wouldn’t need to be misled. And the lies, damned lies, and statistics that have been devoted to doing that brings me back to one of my favorite Thomas Sowell sayings: “When you want to help people, you tell them the truth.” In this case, its contrapositive—we are not being told the truth, so those misleading us are not trying to help us—is particularly important.


Gary Galles

Gary M. Galles is a Professor of Economics at Pepperdine University and an adjunct scholar at the Ludwig von Mises Institute. He is also a research fellow at the Independent Institute, a member of the Foundation for Economic Education faculty network, and a member of the Heartland Institute Board of Policy Advisors.

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