Speaking the unspeakable -- and doing the Proposition 13 sit-ups
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Wednesday, July 20th, 2005 We all know it: Many of us in Palo Alto are enjoying huge property tax breaks, thanks to Proposition 13.
We also know that Proposition 13 is off limits to politicians. A sacred cow. A third rail, electrified and deadly. No one wants to touch it because -- like tea in Boston Harbor -- it has come to symbolize taxpayers' control over taxes.
But there is a difference. Proposition 13 results in a disproportionate benefit to long-term homeowners. I am among those who benefit from this disparity, and until recently I had not questioned it. Sometimes you get lucky, I thought.
Then our kids started trying to buy homes in California. ...
In 1978, California taxpayers passed Proposition 13, which rolled back property taxes to 1976 levels, specified that property taxes would be limited to 1 percent of property values, and that assessed values could not rise more than 2 percent per year unless the property was sold.
The result: Since we have owned our home since 1980, our property taxes are about one half of what my neighbor pays -- who has just purchased a similar house. This two-tiered property tax system is unfair.
Palo Alto City Council member Bern Beecham went out on a lonely Proposition13 limb back in June (Cost of Housing, Palo Alto Weekly, June 8, 2005). Before I could even bring the paper into the house that day, I had received an e-mail from an irate friend.
Beecham had remarked that long-time residents were paying less for services than their neighbors since their property taxes are less than those paid by more recent residents who own a home of comparable value.
My friend's ire is understandable.
Proposition 13 was a landslide success in California because property taxes had reached notorious levels. The result was a gravy train for state and local governments, which prompted Proposition 13 author Howard Jarvis' winning slogan: "I'm mad as hell and I'm not going to take it anymore." Sixty percent of the voters agreed.
Now there is every reason to believe that if we undo Proposition 13, we could again be hit with sky-high property taxes, or worse, be forced out of our homes.
Then I go back to thinking about all of the young people who can't buy a home in Palo Alto or anywhere in California. Inflated purchase prices are bad enough, but disproportionately high property taxes on top of this inflated value, make the burden too great.
Add to these economics of home ownership the other taxes, assessments and fees that offset the lower real estate taxes of some. These are levied equally on homeowners regardless of their pre -- or post -- Proposition 13 status.
My advantage rests squarely on the backs of these young families. No matter how you spin it, it's not equitable.
Beecham's remark about taxes and services, although correct, is somewhat misleading. If we wanted all people to pay the same amount for services we would probably devise a system of nothing but user fees.
Instead, taxes are considered to be one's fair share of the cost of public services. The value of one's home is one measure of that fair share, but not the only one. This gets to the heart of my friend's anger and the roots of Proposition 13.
Many of us could not afford to buy our homes at today's prices, let alone pay the taxes on their assessed values. None of us is willing to allow property taxes to be tied to rising property values without any limits -- and without any compensation for individual circumstances.
Nonetheless, the tax disparity is real, and it is a real barrier to many people's ability to own a home.
The Howard Jarvis Taxpayers' Association issues a publication titled: "What Do You Tell Your Neighbor About Proposition 13?" One of the sample questions is: "Well, it still seems like I'm paying too much. Don't you agree?" And the answer: "We all feel that way, but in fact, thanks to Proposition 13, the tax rate for all Californians is only a third of what it was. If you think things are bad now, multiply your tax bill by three and see what you get."
Come on. My neighbor's property taxes are higher than mine in part because mine have been kept artificially low. Assuming a certain level of tax revenue, if my taxes can't be raised, then the balance of what is needed will have to come from someone else. If anyone should be doing the multiplication, it is me, not my neighbor.
Proposition 13 achieved what voters wanted: Property taxes that didn't rise indiscriminately along with property values, and limited overall tax rates. We can and should hang on to these achievements, even maintain the current level of total tax revenue, and still reallocate property taxes more equitably.
It's time to put Proposition 13 back on the drawing board, even if our penalty, as Governor Schwartzneger told his advisor, Warren Buffet, is 500 sit-ups.