July 18, 2003

Commentary

It’s Not The Fault of Proposition 13

by Richard Rider
Chair, San Diego Tax

For 25 years, one of the most enduring canards is that “Prop 13 gutted local California governments.” Every imaginable failing by local government has, at one point or another, been blamed on Prop. 13.

Indeed, it has always been my admittedly facetious contention that, if the voters hadn’t passed Prop 13, local politicians and bureaucrats WOULD have — because Prop 13 has been the widely-accepted alibi politicians trot out time and time again to explain their ongoing failure to manage their budgets and properly deliver the fundamental government services for which we pay.

Local politicians DO have one legitimate beef about property taxes — the state is confiscating a huge chunk of this revenue. But that is not the fault of Prop 13. Most of this revenue shift to the state occurred supposedly as a temporary measure in 1993 to shore up state funding during the recession. Of course, this “temporary” measure has become permanent, and THAT is what the local politicos SHOULD be screaming about.

The core contention by the big spenders is that we don’t pay enough property taxes — that Prop 13 destroyed the tax base for local government. These whiners cleverly omit the actual historical figures — the data destroys their argument. Consider San Diego County’s property tax history.

In the year prior to Prop 13 taking effect, San Diego city and county property owners paid $638.6 million in property tax. The next year, property tax revenues, which had soared 20% in just the last two years, dropped back dramatically to $353.4 million to meet Prop 13’s 1% of appraised value limitation. Since then, property tax revenues have climbed rapidly. Within six years, property tax revenues exceeded pre-Prop 13 levels.

This fiscal year (ending in June), total county property taxes are $2,834.6 million, over four times more than we paid the year PRIOR to Prop 13, and eight times more than the first year Prop 13 took effect.

However, to be accurate, we need to adjust this figure to reflect both population growth and inflation since the passage of Prop 13. Total San Diego County population has grown from 1,694,000 in 1978 to about 2,835,000 today, a population increase of 67.4%.

During this same time, the total inflation has been about 180%, according to the Bureau of Labor Statistics (there is an inflation calculator on its home page — http://www.bls.gov/ ). Thus, if the bloated PRE-Prop 13 property tax revenue had continued to grow by inflation plus population growth (totaling 274.4%), revenues would now total $2,218.5 million. But this amount is over $600 million less than is now being collected WITH Prop 13 in place!

Stated differently, we are now paying 27.8% more property taxes than the old bloated tax, even after adjusting for population and inflation increases. The mind boggles to think how much higher property tax payments would be if we had NOT passed Prop 13.

Sadly, one can be confident that, even if we HAD paid all that extra property tax, the spendthrift politicians would STILL be telling us that we need to pay even higher taxes. They spend all they can lay their hands on, and then plead government poverty.

Actually, total tax revenues from real estate are growing at an ever faster rate. In the last 5 years, San Diego County core property tax revenue has risen 56.5%, with no slowdown in sight. In addition, in the last decade, a host of property tax assessments for everything from school bonds to road median maintenance have been levied against property owners. And local building “fees” (in essence, extortion charges levied to get permission to build — fees ultimately paid by the property buyers) are now among the highest in the nation, particularly within the city of San Diego.

Add to that increase the rapid growth of other forms of local government revenue (especially sales tax rate increases and water/sewer charges), and it is apparent that San Diego politicians do not have a revenue problem — they have a SPENDING problem.

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