Opinion

California’s Tax Counterrevolution

REUTERS/Stephen Lam

Lloyd Billingsley Policy Fellow, Independent Institute
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This month California homeowners receive property tax bills marked OPEN IMMEDIATELY. Golden State government is always in a hurry to grab people’s money, but the real story is California’s ongoing tax counterrevolution under governor Jerry Brown.

Brown was also governor in the late 1970s, when soaring property taxes were literally driving people from their homes. Embattled Californians responded with the People’s Initiative to Limit Property Taxation.

This measure capped property tax rates for residential and commercial properties at 1 percent of the assessed value and prevented assessed value from growing more than 2 percent a year. The initiative also required a two-thirds vote of the legislature to enact any change in state taxes designed to increase revenues. It created no new state agencies and included no mandate for new state spending.

Governor Brown called it a fraud and a rip-off, but the initiative duly appeared on the June 6, 1978, ballot as Proposition 13. A full 65 percent of California voters approved the measure, a landslide victory. Governor Brown then supported the measure, proclaiming himself a born-again tax cutter.

California’s ruling class has always hated Proposition 13 because it limits the state’s power to tax. That power is precisely what the ruling class wants to expand, so they deploy a strategy of divide and con.

Pro-tax forces advocate a “split roll” which, as Dan Walters of the Sacramento Bee notes, would “preserve Proposition 13’s tax limits for residential property but make commercial properties subject to assessment upgrades and raise their property taxes.” Such campaigns have appeared before, and the latest is called Make It Fair, a coalition backed by unions.

Make It Fair claims that, since 1978, taxes paid on “commercial” property have declined from 45 percent to 28 percent, while  residential property’s burden has risen from 55 percent to 72 percent. The California Taxpayers Association counters that asserting, stating that 62 percent of property taxes come from commercial property and 38 percent from residential.

Gov. Brown has been wary of split-roll efforts, but he did support Proposition 30, a 2012 measure that increased taxes on Californians earning more than $250,000 a year, whom Brown called “millionaires.” The measure, titled “Temporary Taxes to Fund Education,” also hiked sales taxes on all Californians.

The governor, a former seminarian, evangelized in favor of the measure with Bible passages such as Luke 12:48: “To those whom much is given, much will be required.” High-income Californians, he preached, “have been blessed, and they must join with us in blessing those that have not been as fortunate.” In his view, wealthy taxpayers didn’t create useful products people wanted to buy. They were simply “blessed.”

Proposition 30 duly passed in 2012, making California the state with the highest marginal income tax rate, at 13.3 percent. The state also deploys the nation’s highest minimum sales tax at 7.50 percent, which in some municipalities can rise to 10 percent.

Kiplinger rates California the least tax-friendly state, and it may soon get worse. As 2016 approaches, government employee unions such as the California Teachers Association, led by state education superintendent Tom Torlakson (D-CTA), want to extend the income-tax hikes of Proposition 30 for 12 years. In late September, a second group joined the cause, headed by Ace Smith, who ran the first Proposition 30 campaign and Jerry Brown’s campaigns for governor.

Governor Brown is on record having said that Proposition 30 should be temporary, but he has changed his mind before, and not just on Proposition 13. As a presidential candidate Brown advocated a flat tax, but he now prefers more punitive arrangements, what advocates call “progressive.”

Meanwhile, the “split roll” measure and Proposition 30 extension do not limit government or lower taxes. On the contrary, they confirm that California leads the tax counterrevolution.

Lloyd Billingsley is a Policy Fellow and Communications Counsel at the Independent Institute. He is the author of Hollywood Party: Stalinist Adventures in the American Movie Industry and the forthcoming Bill of Writes, a collection of his journalism.

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