California's Prop 13

[chilon]

Breaking off from another thread.

California's Prop 13 was passed in 1978 due to skyrocketing property taxes that were forcing many retired homeowners into paying property taxes they couldn't afford based on their fixed income.

Everyone knew California needed a solution but the special interests that shaped Prop. 13 created something that has far more side effects than just helping granny keep her home. What many have observed (in the spoiler below) is that Prop. 13 has created several huge structural incentive problems that make budgets more unpredictable, distort free market competition and support a system that will make any crisis worse because the system itself is not stable.

Simple Prop. 13 Information

"Buffett wrote, "My sympathies clearly are with the 'non-billionaire' family purchasing a $300,000 house in Chico today that faces real estate taxes materially higher than those borne by this non-resident billionaire on his $4 million house in Laguna. This family, because of Proposition 13, has been selected to subsidize me."

Prop 13 Analysis from UC Hastings School of Law Professor

How Prop 13 distorted Redevelopment Agencies

Spoiler Alert, click show to read: 

Many would actually argue that prop 13 destroyed California. To understand this, we need a quick refresher California taxes. To simplify things, there are three main types of tax in California: 1) State Income Tax. This goes to the actual state government. 2) Sales Tax. This is split between state government (7.25%, soon to be 8.25%) and county (up to 9.75%). 3) Property Tax. This is a county tax and goes to local government.
Before Prop 13, property taxes were assessed based on the current value of the land. So when a housing boom hit, people's property prices shot up, and their taxes followed suit. This was a somewhat flawed system, as land prices were skyrocketing, and people couldn't afford to hold their houses. As a result, prop 13, a piece of citizen legislation, was enacted in 1978 and basically stated that the property tax of a piece of land would be fixed at 1975 levels with a maximum of a 2% increase each year, regardless of change in property value. Though reform was essential, prop 13 was NOT what California needed, and was a classic example of the "Tragedy of the Commons."
By capping property tax, Californians did get more money in their pockets. But only 13% of savings actually went to the citizens. 87% of that tax money went to coroporations with large tracts of land (agriculture, warehouses, ...). Because these funds went directly to counties, the counties were pretty much rendered broke instantly. Most local services (police, education, firefighters) come at the county level, so their budgets were destroyed as a result.
To remedy this, counties began to lobby the state for more funds. Remember, the state still had income tax and sales tax. Unfortunately, income tax is a much harder amount of money to predict when compared to property tax. So now there's a central state government that needs to fund its counties with money it doesn't really know it has. On top of this, a state government is not as responsive to local needs as a county, so the ability for a government to recognize and respond to the needs of its constituents was crippled. Competition for state funds became fierce, and counties hired lobbyists to gain traction. Bigger, richer counties could afford better lawyers. Smaller counties were left in the dust.
Currently, prop 13 still weighs upon California industry. Older warehouses and smokestack industries are still paying 1975 property tax (with 2% increases every year), whereas industries that want to move in can't, simply because they would be paying so much in property tax compared to their longstanding competitors. It has created a monopoly on organizations that needs space.
The perfect model for a county to actually make money today comes from an unlikely source: Emeryville. They limited their population so there are less constituents to pay for. They are located next to a freeway that is payed for on the Federal dime. They kicked out smokestack industries for big-box retailers, and take in all the sales tax they can. Finally, their workforces commutes from the impoverished Oakland next door, so that can pay peanuts without affecting their own populace. It's clean, attractive, safe, and exploitative on so many levels.
[Sorry, I can't give you the specific references, as they come from lecture notes of Kerwin Klein's "History of California" course at Berkeley. An amazing course, I might add]

Discussion of Prop. 13

Here's what I originally sourced in my previous post:

http://www.lao.ca.gov/handouts/state...ax_3_12_12.pdf

Argue with them. That's a 2.5 billion-dollar annual loss in recent years based upon the national average property tax burden. Could the loss have been relatively greater in previous years? Sure, but it doesn't add up to the 17 billion per year average you claimed, nor the financial Achilles' heel you and so many tax-and-spend advocates claim either. Since I don't understand Prop 13, explain it to me in detail with objective tax data. Again, has California lost money on Prop 13? Sure. Has it been the greatest factor in the state's budget problems? No.

I don't need to argue with the Legislative Analysts Office since they are not ones making the claim that Prop.13 is irrelevant as you seem to be making. I guarantee if you actually spoke with analysts that worked there they would completely agree with the problems of Prop13 since, as I stated, just about every economist and historian of California that lives here and studies these issues for a living recognizes the real issues.

Your single statistic proves absolutely nothing and does not address the ways that Prop.13 distorts both free market competition and predictability of the collection of local (County) taxes.

First you need to look at total amount lost to Prop 13 which is half a trillion dollars since 1979 not just the current year. But even that misses the point really. As the link I included mentions the problems are:
1. How Prop. 13 has completely distorted free market competition by erecting an increasingly difficult to overcome barrier of entry in any sector that needs commercial/industrial real estate.
2. Shifting Counties away from predictable property tax collection and into relying on the State to divvy out unpredictable sales and income tax revenue.
3. The requirement of 2/3 majority in the state legislature to change anything.

You should also back away from saying things "you and so many other tax and spend advocates...". That shows you are completely missing the point. The point in bringing up Prop 13 is not for me to claim something simplistic like "If there was no Prop. 13 then there would be no state budget deficit". That is a strawman on your part that has missed the entire point.

The problems that I am revealing are the structural incentive problems created by Prop. 13 (and also Prop. 98 as I first brought up but we'll leave that aside for now) that inhibit state economic growth and compound any problem. These structural incentive problems are getting worse every year so they are going to compound any other crisis that hits the state even greater in the future (the energy crisis caused by the Wilson(R)-Villaraigosa(D) energy deregulation scheme, the dot.com burst or the derivative bubble of 2006-2008 that hurt California more than most states).

The structural incentive problems compound any situation in ways that are not easy to measure at all and certainly not definitively. You can't measure these private market distortions in macro numbers. What is obvious though is through simple Game Theory you can see how the markets are distorted by Prop. 13's increasing barrier to enter markets. You can also see through studies in uncertainty and economic decision making how a system that relies on a central authority dishing out funding that is increasing uncertain (state doling out portions of state income tax to counties) rather than predictable (property taxes collected by counties themselves) is prone to be more wild with a greater potential for things like bigger budget deficits because revenue is much less predictable.

[Lord Thesaurian]

The same special interests that birthed Prop 13 would run your new "nation" of California. It always amazes me when sectarian independence types somehow imagine that their idea of paradise will simply glide to democratic reality once the desired "revolt" or "secession," respectively, takes place. You decry the corruption caused by powerful interests in your state but seem to assume that a "peaceful secession" will make them dedicated humanitarians of some kind.

I don't need to argue with the Legislative Analysts Office since they are not ones making the claim that Prop.13 is irrelevant as you seem to be making. I guarantee if you actually spoke with analysts that worked there they would completely agree with the problems of Prop13 since, as I stated, just about every economist and historian of California that lives here and studies these issues for a living recognizes the real issues.

I never said that it was "irrelevant." I said Prop 13 is a minor issue compared to illegal immigration, education, welfare, unions and direct democracy; all of which greatly overshadow the very real "structural problems" you pointed out due to Prop 13. Reassessing tax rates each time a property changes hands does mean significant disparities in what the rates on recent vs older owners. No one disputed that.

Perhaps, however, counties would not be so strapped for cash if they were not funding the pensions of existing plus one or two retired public service union systems, for example. These are the kinds of extenuating issues that make Prop 13 less of the cut-and-dry disaster you claim it is. I have only ever argued that Prop 13 is merely an unfortunate augmentation of a system with much more inherent flaws.

Your single statistic proves absolutely nothing and does not address the ways that Prop.13 distorts both free market competition and predictability of the collection of local (County) taxes.

I simply addressed the relative "loss" in tax revenue. To go with your "half-trillion" number, take any of the other statistics I posted and stretch them back to 1979 for a ballpark figure. The total cost of illegal immigrants, welfare and union pensions, based upon an aggregate figure gathered from a 30-yr application of the statistics I posted in the other thread, is about 2 trillion since 1978. If I were to construct some kind of exponential growth model like you seem to have done then I could drag that number up to something even more astronomical. If you want to talk about costs for "newcomers" in California, then yes, Prop 13 is a huge deal. Over a 30 year linear track record, however, one sees that it is something the state could have planned and budgeted for. The problem is that governments don't like budgets. The State of California is not unique in this regard. Other states and most infamously, the Federal government, do this all the time; overspend and then cry lack of revenue later.

First you need to look at total amount lost to Prop 13 which is half a trillion dollars since 1979 not just the current year. But even that misses the point really. As the link I included mentions the problems are:
1. How Prop. 13 has completely distorted free market competition by erecting an increasingly difficult to overcome barrier of entry in any sector that needs commercial/industrial real estate.

I'm pretty sure you can attribute such problems to bureaucracy in general and/or to corporate and union territorialism. If you really want to get into all the policies in California that distort the free market, Prop 13 falls pretty far down on the list.

2. Shifting Counties away from predictable property tax collection and into relying on the State to divvy out unpredictable sales and income tax revenue. 3. The requirement of 2/3 majority in the state legislature to change anything.

Well perhaps direct democracy will come in handy here. I understand Prop 13 is very unpopular, so start a petition that says municipalities can set their own property tax rates, get 500,000 signatures, and put it on the ballot. If you are saying there is some kind of corporate cabal maintaining Prop 13, then I ask again how an independent California would improve that trend.

You should also back away from saying things "you and so many other tax and spend advocates...". That shows you are completely missing the point. The point in bringing up Prop 13 is not for me to claim something simplistic like "If there was no Prop. 13 then there would be no state budget deficit". That is a strawman on your part that has missed the entire point.

The problems that I am revealing are the structural incentive problems created by Prop. 13 (and also Prop. 98 as I first brought up but we'll leave that aside for now) that inhibit state economic growth and compound any problem. These structural incentive problems are getting worse every year so they are going to compound any other crisis that hits the state even greater in the future (the energy crisis caused by the Wilson(R)-Villaraigosa(D) energy deregulation scheme, the dot.com burst or the derivative bubble of 2006-2008 that hurt California more than most states).

You claim the structural problems caused by Prop 13 ruined California's finances. The best way to prove that the latter idea is not entirely correct from a perspective relative to larger fiscal woes was with tax data. If the problem is indeed primarily structural and so horrific, then it can be repealed or circumvented. None of this explains how an independent California would suddenly "free" itself of these problems, relatively few of which were caused by federal actions.

The structural incentive problems compound any situation in ways that are not easy to measure at all and certainly not definitively. You can't measure these private market distortions in macro numbers. What is obvious though is through simple Game Theory you can see how the markets are distorted by Prop. 13's increasing barrier to enter markets. You can also see through studies in uncertainty and economic decision making how a system that relies on a central authority dishing out funding that is increasing uncertain (state doling out portions of state income tax to counties) rather than predictable (property taxes collected by counties themselves) is prone to be more wild with a greater potential for things like bigger budget deficits because revenue is much less predictable.

One doesn't need to use the convenient abstraction of "Game Theory" to know that California has led the way in practicing Keynesian economics in the US; with or without federal intervention. If you do not like economic controls and incentives, then you live in the wrong state. How would this very structural reality be improved in an independent California, exactly? If you are more of a libertarian/anarchist, then why bother waiting for California to secede? Just move to the Canadian wilderness and go "off the grid."

[chilon]

The same special interests that birthed Prop 13 would run your new "nation" of California. It always amazes me when sectarian independence types somehow imagine that their idea of paradise will simply glide to democratic reality once the desired "revolt" or "secession," respectively, takes place. You decry the corruption caused by powerful interests in your state but seem to assume that a "peaceful secession" will make them dedicated humanitarians of some kind.

This is a thread about Prop 13, you can save this type of moralizing for another thread.

I never said that it was "irrelevant." I said Prop 13 is a minor issue compared to illegal immigration, education, welfare, unions and direct democracy; all of which greatly overshadow the very real "structural problems" you pointed out due to Prop 13. Reassessing tax rates each time a property changes hands does mean significant disparities in what the rates on recent vs older owners. No one disputed that.

Except Prop. 13 is not minor compared to all those issues. You really have no understanding of California when you make that assertion. Also, Prop 13 WAS a result of "direct democracy" as you euphemistically call our Proposition system.

Perhaps, however, counties would not be so strapped for cash if they were not funding the pensions of existing plus one or two retired public service union systems, for example. These are the kinds of extenuating issues that make Prop 13 less of the cut-and-dry disaster you claim it is. I have only ever argued that Prop 13 is merely an unfortunate augmentation of a system with much more inherent flaws.

Not really. Part of the problem with all budgets (not just state but counties) is the inability to predict revenues which a reliance on state doling out income tax revenue causes that traditional property tax does not. Prop 13 is not an "augmentation" of any system. It was a intended to solve one problem and it was hijacked and became the source of much greater structural problems.

I simply addressed the relative "loss" in tax revenue. To go with your "half-trillion" number, take any of the other statistics I posted and stretch them back to 1979 for a ballpark figure. The total cost of illegal immigrants, welfare and union pensions, based upon an aggregate figure gathered from a 30-yr application of the statistics I posted in the other thread, is about 2 trillion since 1978.

And only looking at the consequences in a narrow minded "tax revenue loss" mindset completely misses the point, ignores all the structural problems created and basically creates a strawman.

I'm pretty sure you can attribute such problems to bureaucracy in general and/or to corporate and union territorialism. If you really want to get into all the policies in California that distort the free market, Prop 13 falls pretty far down on the list.

Then you clearly do not understand the incentive problems created by Prop 13. Studying some game theory and economics would assist in your understanding.

Well perhaps direct democracy will come in handy here. I understand Prop 13 is very unpopular, so start a petition that says municipalities can set their own property tax rates, get 500,000 signatures, and put it on the ballot. If you are saying there is some kind of corporate cabal maintaining Prop 13, then I ask again how an independent California would improve that trend.

Any corporate interest that has benefited from Prop 13's barriers to entry are going to oppose reforming it. Due to provisions inside the bill itself, most historians don't believe it can modified or adjusted without calling a California Constitutional Convention. And again, leave out the "independent California" comments as that is not related to debating the faults of Prop. 13 and its unfortunate impact on the state.

You claim the structural problems caused by Prop 13 ruined California's finances.

I did not claim Prop. 13 alone ruined California finances. If you misunderstood a statement, then let me correct. As I said in this OP, Prop. 13 creates structural incentive problems that compound any other crisis the state might have or has had (including the energy crisis and the 2006-2008 derivative bubble). It is a structural incentive that distorts both private markets and public budgeting. Due to its very nature the distortions get worse the more years pass by.

If the problem is indeed primarily structural and so horrific, then it can be repealed or circumvented.

Not very easily. As I said earlier due to provisions in Prop13 itself it is going to take extraordinary political capital to overturn it (just like it would to repeal or reform Prop. 98 which is an additional problem).

None of this explains how an independent California would suddenly "free" itself of these problems, relatively few of which were caused by federal actions.

This is the last time I will say this but the merits and/or faults of Prop 13 are what is being debated here in this thread not an independent California.

One doesn't need to use the convenient abstraction of "Game Theory" to know that California has led the way in practicing Keynesian economics in the US; with or without federal intervention.

One does need game theory to easily understand the incentive problems caused by Prop 13 which you seem to have time understanding.

[MathiasOfAthens]

Prop 13 sucks.

[Lord Thesaurian]

We seem to be travelling down the road to impasse again. Let me examine this. It seems our primary (and relatively minor in the scope of the original thread) issue revolves around whether Prop 13 is a progenitor or a symptom of a flawed system. I argue the latter, you the former. I argue that Prop 13 is minor compared to other issues like illegal immigrants, unions, etc that have spread farther and deeper into the "structure" of the state long before Prop 13. You argue that the latter is just as grave if not more so. Fine, I'll concede that; though I still don't see how what amounts to corporate tax loopholes compares to institutionalized union strong-arming of the public coffers, the fact that the at least 2.6 million illegal immigrants living in California are eligible for entitlements, or the fact that teacher's unions are largely to blame for the abysmal state of California's public education system.

So the long-time residents and companies of California are essentially getting a large tax break....a "patriot" such as yourself might appreciate rewards for "real" Californians, but I digress. If you're worried about "corporations" cashing in on tax breaks at the expense of the public, I still don't see how Prop 13 is particularly unique, aside from its creators' crafty measures that made the now-infamous law so permanent. The original proponents used the same direct democracy measures that Amazon.com used to escape sales tax. If it hadn't been called Prop 13, it would have probably been called "Tax Relief for Job Creators" or something. This is nothing new. I realize that based on an exponential model with 1979 as the start date, the taxation disparity becomes more and more marked and does indeed impact the costs for new individuals and businesses trying to exist in California. But I do not believe that model can be used effectively in terms of California's recent and current budget problems - which is what I originally referred to when addressing Prop 13. I outlined that earlier.

Ultimately all this is of little consequence, especially in context of the original discussion. If Prop 13 was repealed tomorrow, it would solve little, and that is the point of what I've always said. The state would promptly issue a new budget for next year, considering the new revenue increases to be a surplus, and nothing would really change. This is speculation based upon the self-serving character of bureaucracy. The following is a statistical probability based upon the very conditions that prompted Prop 13 and so many other direct democracy measures:

Those who effectively just had their property taxes doubled, such as older residents and companies, would promptly form political action groups to restore their discounted status, either through tax breaks or direct handouts. California is the land of "structural incentives." If its not called "Prop 13," its called something else. Repealing a product of the "system" will not really solve much.

It is you who have essentially created a "strawman" by diverting into this subtopic away from the hopelessly lost cause of California secession. This seems to be a soapbox of yours, elicited by my seemingly minor contention with the extent of the damage caused by Prop 13. So if you want to claim that Prop 13 is some kind of insidious "structural" cancer, fine. I could care less. It ultimately doesn't impact me at all. The idea that California can secede does. So again, if Prop 13 was repealed, how would that "save" the "structure?" Those who can would get around the huge tax hike, and those who can't would hold rallies and protests everywhere. Municipalities, now able to set their own property taxes, would still need to set them sky high to pay for union pensions and the like. Ultimately taxes go through the roof for thousands, nothing changes for newcomers, the state spends all the new money, and it's a short-term headache. In the long term, more universal property tax revenue will ease deficits provided the state and local governments don't simply spend all the money. Property taxes would once again be dependent on unpredictable changes in value and nothing really changes. Getting rid of Prop 13 is not getting rid of corporate welfare. That much is here to stay and is certainly not exclusive to Prop 13. Repeal would mean an end to a bad idea symptomatic of flawed civic philosophy, quickly drowned out or replaced by existing or new problems. It would certainly be a great step to the positive, but would do little to attack the special interests, high taxes, and high spending that is inherent to the state and national government. The latter has always been my point.

[chilon]

We seem to be travelling down the road to impasse again. Let me examine this. It seems our primary (and relatively minor in the scope of the original thread) issue revolves around whether Prop 13 is a progenitor or a symptom of a flawed system.

It can't be reduced to just a "symptom of the system" because it has create entirely new structural incentives that did not exist before. As the links I put in the OP show, it has spawned incentives that both distort the private sector and also distorted the public sector budgeting process.

It was put into place because of the economic reality of rising California real estate prices so even its inception cannot really be considered a "symptom of the system" so much as a response to economic realities.

So no,, its not a symptom, it was a structural change which is now distorting both private markets and public budgets. You can't really get around that fact because its reality.

I argue that Prop 13 is minor compared to other issues like illegal immigrants, unions, etc that have spread farther and deeper into the "structure" of the state long before Prop 13. You argue that the latter is just as grave if not more so. Fine, I'll concede that; though I still don't see how what amounts to corporate tax loopholes compares to institutionalized union strong-arming of the public coffers, the fact that the at least 2.6 million illegal immigrants living in California are eligible for entitlements, or the fact that teacher's unions are largely to blame for the abysmal state of California's public education system.

You're going down a red herring path here. First, I never said Prop.13 was "solely" responsible for anything. In fact, in the first post on this issue in another thread I already mentioned other factors that are involved. For education I already reference Prop.98 and if you don't address that, you aren't addressing the problems with education in California. Also it must be recognized that California has educational challenges that many other states do not have (the highest number of english second language students anywhere). but those are separate issues and certainly don't negate the serious problems that Prop.13 has caused.

So the long-time residents and companies of California are essentially getting a large tax break....a "patriot" such as yourself might appreciate rewards for "real" Californians, but I digress.

For the last time back away from pointless attempts at condescension. As I already demonstrated Prop. 13 distorts private markets and wreaks havoc on public budgets. That is why I oppose it. Enough with your fallacious, snide and meaningless remarks.

If you're worried about "corporations" cashing in on tax breaks at the expense of the public, I still don't see how Prop 13 is particularly unique, aside from its creators' crafty measures that made the now-infamous law so permanent.

Because it is not the same thing as other 'tax cuts'. As I mentioned many times and provided supporting links, it distorts the entire structural incentive system and affects how every almost every business does business in the state. It also wreaks havoc on budgeting in ways very few other taxes or tax cuts ever do because it changes the balance of sales tax, income tax and property tax and forces the state into using highly unpredictable income tax to support counties that didn't wouldn't need that support under other systems. It also increases bureaucracy.

Ultimately all this is of little consequence, especially in context of the original discussion. If Prop 13 was repealed tomorrow, it would solve little, and that is the point of what I've always said.

Just because you said it doesn't make it true. First, no one is talking about repealing it entirely, just reforming it. Second, a legitimate reform would most definitely start solving many problems in the state. Just because you want to ignore those problems doesn't mean they don't exist. Of course its not the *only* issues, but its the most important structural issue that affects everything else including what happens when other crises hit.

Property taxes would once again be dependent on unpredictable changes in value and nothing really changes.

This is a strawman. Again, repealing Prop. 13 is not the goal, reforming it is. Historically and economically, property taxes are far more predictable than sales or income tax revenue. Its the most stable form of taxation even if property values rise or occasionally fall.

Generally speaking, state income and sales taxes exhibit more volatility than property tax revenues. Local units of government can maintain stability in property tax revenues by adjusting rates, while income and sales tax revenues, with set rates, vary based on fluctuations in the volume of taxable income and sales generated. Changes in income and sales tax revenues are the result of a variety of factors. One major factor is the state’s economy, which affects the income of Illinois residents, corporate profits, and consumer and business purchases. When economic output goes down, individual income, corporate income, and sales all decline as well. This results in less tax revenue for governments that rely on income and sales taxes.

Getting rid of Prop 13 is not getting rid of corporate welfare.

Another strawman. No believes it will get rid of something as vague as 'corporate welfare'. What reforming it should change is the huge distortions in the markets that Prop. 13 will not longer protect the oldest, long term corporate players that obtained a huge advantage over any new business and provide a barrier of entry to new competition which distorts the market.

It is you who have essentially created a "strawman" by diverting into this subtopic away from the hopelessly lost cause of California secession.

First this is not a "subtopic", its a different topic that got brought up in another discussion. Second, the other thread wasn't even about California secession initially. And that topic could go on forever. Any arguments you or I make are based entirely on hypothetical situations and counter-factuals. Its unprovable in any way and mostly just debating speculation over future time periods which gets tiresome when you don't debate rationally but use condescending remarks and don't really get the point of the arguments. So put that debate to rest.

[Lord Thesaurian]

It can't be reduced to just a "symptom of the system" because it has create entirely new structural incentives that did not exist before. As the links I put in the OP show, it has spawned incentives that both distort the private sector and also distorted the public sector budgeting process.

So no,, its not a symptom, it was a structural change which is now distorting both private markets and public budgets. You can't really get around that fact because its reality.

For the last time back away from pointless attempts at condescension. As I already demonstrated Prop. 13 distorts private markets and wreaks havoc on public budgets. That is why I oppose it. Enough with your fallacious, snide and meaningless remarks.

Yeah, I apologize. I was still in California secession mode. I imagine in the case of Prop 13, you probably know something of what you're talking about.

Since you don't want to repeal it but reform it, that seems easier and again, approachable from the legislative and proposition process. If you oppose it specifically because it "distorts private markets and wreaks havoc on public budgets," then I ask why you live in the state that rivals those of New England in its ability to do just that. Thus I suppose you're opposed to things like Prop 1A, Medi-Cal, and the Delta Plan, all of which are expensive, "structural" changes that would be very difficult to get rid of once implemented.

I guess my dilemma here is why you and many Californians in general are so upset about Prop 13 when the latter (not necessarily you) have voted to build the huge government apparati and welfare systems that cause such high taxes and budgets; and respectively, the direct democracy system that largely made Prop 13 possible.

I realize Prop 13 is "bad" and does all the things you say it does. I just am having trouble wrapping my head around why you're so upset with this one problem when your state has many other equally huge problems. To put it another way, why is Prop 13 your soapbox?

So no,, its not a symptom, it was a structural change which is now distorting both private markets and public budgets. You can't really get around that fact because its reality.

I'm not trying to get around anything. One could say that Prop 13 is a symptom of the direct democracy craze. Californians bypassed the legislature and passed it themselves, now it's come back to bite them.

You're going down a red herring path here. First, I never said Prop.13 was "solely" responsible for anything. In fact, in the first post on this issue in another thread I already mentioned other factors that are involved. For education I already reference Prop.98 and if you don't address that, you aren't addressing the problems with education in California. Also it must be recognized that California has educational challenges that many other states do not have (the highest number of english second language students anywhere). but those are separate issues and certainly don't negate the serious problems that Prop.13 has caused.

I talked about Prop 98 in the other thread. I never said anything about "negating" Prop 13. It just seems much more difficult to deal with 2.6 million illegal immigrants or the massive, entrenched union interests in the state, for example, than it would be to reform a law that has proven counter-productive.

Because it is not the same thing as other 'tax cuts'. As I mentioned many times and provided supporting links, it distorts the entire structural incentive system and affects how every almost every business does business in the state. It also wreaks havoc on budgeting in ways very few other taxes or tax cuts ever do because it changes the balance of sales tax, income tax and property tax and forces the state into using highly unpredictable income tax to support counties that didn't wouldn't need that support under other systems. It also increases bureaucracy.

Increasing bureaucracy is what any government does best. I don't see how you can attribute that to Prop 13.

What "other systems?" Since you don't merely want to repeal it and return to the old system, you would need to present a comprehensive replacement that eases the burden on the state while also providing predictable rates and a solid framework that would allow municipalities to fund their high budgets. You can't just talk about reform without a replacement. For all that time and effort, I would think it would be better spent dealing with the immigrant problem or the union stranglehold on the public coffers. Again, it doesn't affect me and I don't care. I only ever subjectively argued that Prop 13 was a lesser problem to the ones I mentioned. Since immigration, public unions, and debt are issues the whole country faces, I simply argued that these problems were especially troublesome in California. Success in California could point to a way for success in the rest of the country. Prop 13 is a local issue. It's your state and your legislative process. Good luck.

Just because you said it doesn't make it true. First, no one is talking about repealing it entirely, just reforming it. Second, a legitimate reform would most definitely start solving many problems in the state. Just because you want to ignore those problems doesn't mean they don't exist. Of course its not the *only* issues, but its the most important structural issue that affects everything else including what happens when other crises hit.

Again, what reform? I still don't see how it is the most important issue. I've discussed what I do consider to be the most important. When your state has a 100 billion-dollar budget, I don't see why Prop 13 can't be dealt with since it seems people have complained about it for as long as I can remember and many of these same people are busy planning equally costly and permanent projects and sweeping legislation at the same time.

This is a strawman. Again, repealing Prop. 13 is not the goal, reforming it is. Historically and economically, property taxes are far more predictable than sales or income tax revenue. Its the most stable form of taxation even if property values rise or occasionally fall.

I'm guessing other states have viable property tax laws. If Prop 13 is so dire and urgent, why hasn't someone put together another handy proposition and changed the law? If Prop 13 is so ingeniously crafted that it can't be changed, then in that case, it seems like there are other problems to deal with considering this one is irreparable.

Generally speaking, state income and sales taxes exhibit more volatility than property tax revenues. Local units of government can maintain stability in property tax revenues by adjusting rates, while income and sales tax revenues, with set rates, vary based on fluctuations in the volume of taxable income and sales generated. Changes in income and sales tax revenues are the result of a variety of factors. One major factor is the state’s economy, which affects the income of Illinois residents, corporate profits, and consumer and business purchases. When economic output goes down, individual income, corporate income, and sales all decline as well. This results in less tax revenue for governments that rely on income and sales taxes.

So....is this a comparison to the instability of Prop 13? Because if taxing more is too difficult, one can always SPEND LESS.

Another strawman. No believes it will get rid of something as vague as 'corporate welfare'. What reforming it should change is the huge distortions in the markets that Prop. 13 will not longer protect the oldest, long term corporate players that obtained a huge advantage over any new business and provide a barrier of entry to new competition which distorts the market.

Aren't unions and the highest tax rates in the country equally strong barriers against new business? Aren't green tech subsidies, subsidies for certain crops and child care, for example, also "structural" distortions that change outcomes? California is the land of subsidies, taxes and serpentine bureaucracy. Just seems like Prop 13 is another one of those things.

[chilon]

Yeah, I apologize. I was still in California secession mode. I imagine in the case of Prop 13, you probably know something of what you're talking about.

Since you don't want to repeal it but reform it, that seems easier and again, approachable from the legislative and proposition process. If you oppose it specifically because it "distorts private markets and wreaks havoc on public budgets," then I ask why you live in the state that rivals those of New England in its ability to do just that. Thus I suppose you're opposed to things like Prop 1A, Medi-Cal, and the Delta Plan, all of which are expensive, "structural" changes that would be very difficult to get rid of once implemented.

There is no single structural mechanism that distorts private markets and public budgets in a negative multiplier manner the way Prop.13 does. Sure there are plenty of other issues but that one really affects everything else that happens in very subtle ways.

As for other things like Medi-Cal, I am not entirely opposed to anything that government does that might distort markets to a small degree (I am not die-hard Austrian School) but Prop. 13 has actually distorted things in an increasingly negative way to a greater degree that any other structural mechanism we've ever had.

I guess my dilemma here is why you and many Californians in general are so upset about Prop 13 when the latter (not necessarily you) have voted to build the huge government apparati and welfare systems that cause such high taxes and budgets; and respectively, the direct democracy system that largely made Prop. 13 possible.

This really gets into a greater issue of the California Experiment. Direct democracy sounds great in theory. In theory everyone loves the idea that everyone should vote on everything. The idea sounds the most just of any known system. But the reality is that the way direct democracy has affected California can basically be summed up as: "People want to vote more and more services but pay less and less taxes".

The reality is that direct democracy has a whole lot of problems but since its never really been done in any greater degree than California's Proposition, Initiative, Referendum system those problems have never really been exposed before. Measures can get passed that sound great and wonderful on the surface (both Prop. 13 and Prop. 98 fit this bill) but the structural incentives and affects are never truly studied or discovered until the reality hits. The reality is that politically, Granny needed to be able to keep her house. Its a false dichotomy to suggest, as Howard Jarvis and heirs have done, that the only choices are between Prop. 13 as it stands and the old system where property taxes get jacked.

I realize Prop 13 is "bad" and does all the things you say it does. I just am having trouble wrapping my head around why you're so upset with this one problem when your state has many other equally huge problems. To put it another way, why is Prop 13 your soapbox?

Its hardly a soapbox. There are plenty of other issues I have ranted about over the years from health care to education to how the political left and political right both completely got the financial crisis wrong. But when talking about fixing the instability of California's government, Prop. 13 really is the most pressing structural problem. Sure there are other non-structural issues but in every polis, the non-structural issues tend to get, by far the most media play when in fact the structural issues are really the heart of many of the symptoms we see. Same is true of the financial crisis. The structural issues get ignored while the poli left and poli right spin everything to suit their political goals.

I'm not trying to get around anything. One could say that Prop 13 is a symptom of the direct democracy craze. Californians bypassed the legislature and passed it themselves, now it's come back to bite them.

Of course its a symptom of direct democracy. So is Prop. 98. If thats what you meant then I misunderstood you earlier.

I talked about Prop 98 in the other thread. I never said anything about "negating" Prop 13. It just seems much more difficult to deal with 2.6 million illegal immigrants or the massive, entrenched union interests in the state, for example, than it would be to reform a law that has proven counter-productive.

Trying to compare issues is a bit pointless IMO. The fact is that Prop. 13 is a structural issue of government that (at least in theory) can be completely fixed by simply reforming a piece of 'legislation'. Illegal immigration is a complex issue of geo-economic and geo-strategic factors that is not even remotely reducible to even theoretical simple governmental reform. Its also not even as much of a problem as political conservatives imply as the potential strain it does put on the system could potentially be reduced by simply adopting a different political structure that takes economic realities into account.

Increasing bureaucracy is what any government does best. I don't see how you can attribute that to Prop 13.

Increasing bureaucracy is what any organized human system will do best. That isn't what attributable to Prop. 13. What Prop. 13 does is make the State centralized bureaucracy far more influential because it reduces the predictable property taxes and increases the dependence on less predictable income taxes. That presents a more difficult challenge to any bureaucracy to adjust to on a yearly basis.

What "other systems?" Since you don't merely want to repeal it and return to the old system, you would need to present a comprehensive replacement that eases the burden on the state while also providing predictable rates and a solid framework that would allow municipalities to fund their high budgets. You can't just talk about reform without a replacement.

There are plenty of replacements that have been floated. I'm pretty sure one of my initial links was to a paper that specifically presented logical reforms that wouldn't cause "granny to lose her house". Plenty of economists and historians in California are well informed in what could easily replace Prop. 13. The problem is the vested interests that have benefited from Prop. 13 in its current form are quite rich and influential politically so its not quite as simple as it would seem.

I only ever subjectively argued that Prop 13 was a lesser problem to the ones I mentioned. Since immigration, public unions, and debt are issues the whole country faces, I simply argued that these problems were especially troublesome in California.

And to be blunt you are incorrect. Many people seem to think the most talked about issue of the moment (as illegal immigration was last year due to AZ) is somehow the most important but its really not. If you study the structure of California government and the history of our economics and companies you see how Prop. 13 actually is the biggest impediment to fixing the budget problems (which BTW are not even really too much of a problem as Cali still has a thriving, diversified and cutting edge economy).

[Lord Thesaurian]

There is no single structural mechanism that distorts private markets and public budgets in a negative multiplier manner the way Prop.13 does. Sure there are plenty of other issues but that one really affects everything else that happens in very subtle ways.

At this point I've already cited the billions in public money spent on illegal immigrants in California, which is just as structural and even more permanent a problem; not to mention the very recent battles with public unions, which are costing individual municipalities far more than the revenue lost to Prop 13. Paying for one active and one or two inactive police forces is quite a drain on the local treasury, no? These matters have already bankrupted a few CA cities that I can cite if you want to get into that. Need I mention the entire new industries artificially created by public policy and money in california? (http://www.nytimes.com/2011/11/12/bu...pagewanted=all)

So I guess it's a matter of opinion. Like I said, it's your state, not mine, so my thoughts on the matter are ultimately ecclesiastical.

As for other things like Medi-Cal, I am not entirely opposed to anything that government does that might distort markets to a small degree (I am not die-hard Austrian School) but Prop. 13 has actually distorted things in an increasingly negative way to a greater degree that any other structural mechanism we've ever had.

Perhaps. Those issues I mentioned could potentially dwarf Prop 13 over the same period. Pumping an endless supply of water out of the Sacramento river delta, installing a government-owned and operated train from the Bay Area to LA and even Vegas, and government owned and operated healthcare would obviously be huge, permanent projects.

This really gets into a greater issue of the California Experiment. Direct democracy sounds great in theory. In theory everyone loves the idea that everyone should vote on everything. The idea sounds the most just of any known system. But the reality is that the way direct democracy has affected California can basically be summed up as: "People want to vote more and more services but pay less and less taxes".

Right, that's democracy in general. Democracy without republican checks and balances is a disaster. We see it in every democratic society as de Tocqueville warned, and as Ben Franklin says in my sig. The fact that the Proposition system exists in California only streamlines that unfortunate reality.

The reality is that direct democracy has a whole lot of problems but since its never really been done in any greater degree than California's Proposition, Initiative, Referendum system those problems have never really been exposed before

Um, ancient Athens? Modern Greece?

Measures can get passed that sound great and wonderful on the surface (both Prop. 13 and Prop. 98 fit this bill) but the structural incentives and affects are never truly studied or discovered until the reality hits. The reality is that politically, Granny needed to be able to keep her house. Its a false dichotomy to suggest, as Howard Jarvis and heirs have done, that the only choices are between Prop. 13 as it stands and the old system where property taxes get jacked.

Right, that's what happens when you remove the checks and balances and allow the "people" to bypass the legislature. Now the "people" of California want free government healthcare and a free train ride to LA and Vegas. How are they going to pay for it? Nobody seems to have thought of that.

Its hardly a soapbox. There are plenty of other issues I have ranted about over the years from health care to education to how the political left and political right both completely got the financial crisis wrong. But when talking about fixing the instability of California's government, Prop. 13 really is the most pressing structural problem. Sure there are other non-structural issues but in every polis, the non-structural issues tend to get, by far the most media play when in fact the structural issues are really the heart of many of the symptoms we see. Same is true of the financial crisis. The structural issues get ignored while the poli left and poli right spin everything to suit their political goals.

Such is the two party system we have. Direct democracy created Prop 13 and it's busy cooking up more, equally structural gems as I mentioned.

Trying to compare issues is a bit pointless IMO. The fact is that Prop. 13 is a structural issue of government that (at least in theory) can be completely fixed by simply reforming a piece of 'legislation'. Illegal immigration is a complex issue of geo-economic and geo-strategic factors that is not even remotely reducible to even theoretical simple governmental reform. Its also not even as much of a problem as political conservatives imply as the potential strain it does put on the system could potentially be reduced by simply adopting a different political structure that takes economic realities into account.

So you agree that illegal immigration, for example, is a more permanent and complex issue than Prop 13? Because that's what I meant by "bigger issue." And if by "adopting a different political structure" you mean amnesty, that obviously wouldn't fix anything and would only encourage more illegal immigration.

I could concede a gradual amnesty whereby illegal immigrants acquire citizenship over a period of, say, 10 years. Initially all new, well, socii, to use the Roman designation, would be ineligible for any public entitlements. They would be registered as citizens and be bound by the law, pay all taxes they are liable for, and be gradually assimilated. They would also be disallowed from voting in national elections for the first 5 years. This would attempt to alleviate the billions in entitlements spent on illegals and the fact that the "Latino" voter base and voter organizations are directed almost exclusively toward increasing access to the bankrupt entitlement system. Ultimately any kind of amnesty rewards illegal behavior and would introduce a crippling amount of millions of people into the economy. These people would need jobs and access to services. Such madness is obviously unsustainable. No matter what happens, any real "immigration reform" would need to involve significant deportations and stricter border patrol (given the amount of drug violence and invasion on the border I'm not sure why the National Guard hasn't been summoned to deal with the issue). It is a huge problem across the nation and especially in California. Every other nation has immigration restrictions. It is moronic to expect differently from the US, and I could tell many interesting stories about what the Mexican border patrol does to people illegally crossing their southern border. There is a process for gaining US citizenship, and it must be followed. The existence of millions technical criminals does not legalize the crime.

Here is a source that lays out both the pro and anti-immigration arguments. **sorry for off-topic rant

Increasing bureaucracy is what any organized human system will do best. That isn't what attributable to Prop. 13. What Prop. 13 does is make the State centralized bureaucracy far more influential because it reduces the predictable property taxes and increases the dependence on less predictable income taxes. That presents a more difficult challenge to any bureaucracy to adjust to on a yearly basis.

Mandating a maximum of a 2% annual increase is more predictable than property values.....

There are plenty of replacements that have been floated. I'm pretty sure one of my initial links was to a paper that specifically presented logical reforms that wouldn't cause "granny to lose her house". Plenty of economists and historians in California are well informed in what could easily replace Prop. 13. The problem is the vested interests that have benefited from Prop. 13 in its current form are quite rich and influential politically so its not quite as simple as it would seem.

Well therein lies the issue. People can crow about democracy but ultimately it is money and brains that carry the day.

And to be blunt you are incorrect. Many people seem to think the most talked about issue of the moment (as illegal immigration was last year due to AZ) is somehow the most important but its really not. If you study the structure of California government and the history of our economics and companies you see how Prop. 13 actually is the biggest impediment to fixing the budget problems (which BTW are not even really too much of a problem as Cali still has a thriving, diversified and cutting edge economy).

Even the most thriving of economies (like the US) can't withstand ignorant citizenry and Hobbesian leaders for long. California, as a huge state with economic and social factors almost identical to the nation as a whole, provides more focused insight into national problems like the ones I mentioned. That is part of the reason I believe them to be of more pressing concern.

[Border Patrol]

Prop 13 is currently allowing my granny to keep her house. It is known.

[Col. Tartleton]

I vote against all referendums out of principle.

[MathiasOfAthens]

I vote against all referendums out of principle.

LMFAO, thats priceless.

I guess you would vote No to a referendum on banning gay marriage.
If the referendum passes, banning gay marriage, you would vote no again on the next referendum to repeal the previous one, thus supporting the ban on gay marriage that you previously opposed.

[Col. Tartleton]

LMFAO, thats priceless.

I guess you would vote No to a referendum on banning gay marriage.
If the referendum passes, banning gay marriage, you would vote no again on the next referendum to repeal the previous one, thus supporting the ban on gay marriage that you previously opposed.

It's not a perfect system but it works.