Right wing ignoring reality (LA Times Prop 13 issue)
The LA Times has an article by Evan Halpern, today, that claims that the "[s]tate's middle class [is] getting less for its tax dollars." Halpern points out that California once had great roads, a widely-accessible and inexpensive world class university system, and good schools. Alas, it now seems that the state no longer offers high-quality services; quoting a (conservative) expert, Halpern notes that you can't tell the difference between being in California and Texas, any more.
Halpern also identifies new kinds of spending that (he implies) explain the change: he mentions briefly the rising cost of long incarcerations, but mostly focuses on the "tattered" safety net for poorer Californians, which includes health care costs.
But nowhere....nowhere!...does he mention Proposition 13, which capped property taxes and also limited their rate of increase as long as ownership did not change. This is a huge oversight, one so large that it can scarcely be seen as accidental. It's the elephant in state fiscal planning, because the state now pays out of general revenue for all sorts of things that municipalities and counties used to pay for out of property taxes. California has also slipped from being an (admittedly) high-tax burden state in 1970 to the middle of the pack now: state taxes are relatively high on sales and income, but property taxes are quite low, putting the state around 17th in overall tax burden. But none of this is so much as hinted at in Halpern's dishonest analysis.
Here's the letter I sent him: we'll see if he, the LA Times, or the blogsphere picks up one more example of journalistic disingenousness. (See also the Calitics blog for more discussion).
Halpern also identifies new kinds of spending that (he implies) explain the change: he mentions briefly the rising cost of long incarcerations, but mostly focuses on the "tattered" safety net for poorer Californians, which includes health care costs.
But nowhere....nowhere!...does he mention Proposition 13, which capped property taxes and also limited their rate of increase as long as ownership did not change. This is a huge oversight, one so large that it can scarcely be seen as accidental. It's the elephant in state fiscal planning, because the state now pays out of general revenue for all sorts of things that municipalities and counties used to pay for out of property taxes. California has also slipped from being an (admittedly) high-tax burden state in 1970 to the middle of the pack now: state taxes are relatively high on sales and income, but property taxes are quite low, putting the state around 17th in overall tax burden. But none of this is so much as hinted at in Halpern's dishonest analysis.
Here's the letter I sent him: we'll see if he, the LA Times, or the blogsphere picks up one more example of journalistic disingenousness. (See also the Calitics blog for more discussion).
Dear Mr. Halpern,We'll see if there's any response!
Your commentary in today's LA Times refers to some useful issues, such as the changing costs of some state services, or to the rapidly rising cost of incarceration in the state budget.
However, any discussion of state finances without mentioning Prop. 13 is, in my estimation, simply dishonest. Californians are not just "getting less for their tax dollars": property-owning Californians are paying fewer tax dollars, relatively, than they did in the 1950s and 1960s. Despite the erroneous statements of Republican politicians, California's state tax burden is now only middling -- approximately 17th nationally, and far lower than other high-cost/high-service states.
Your credibility would recover if you ran a second article, parallel to this one, that discusses the revenue side of the changes in California fiscal policy, rather than falsely suggesting that shifts in expenditures alone explain our current predicament.
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While Prop 13 may be an issue, the fact is that it passed in 1977 and people transfering property since that time do not have the property tax relief the proposition created. It does not have near the revenue impact this writer indicates. The property owners that owned the same property in 1977 are, mostly, now retired. The real impact to property taxes in California is the long overdue crash in real estate values!
March 1, 2009 5:03 PM | Reply | Permalink
RS, your point has some validity, but it is undermined by several factors (though I confess that I don't have quantitative references).
1. Proposition 13, not only blocks reassessment and limits annual increases (absent a transfer) to 1% per year, it also limits total property tax to 1% of assessed value. This is a moderate rate (there are clearly lower rates in some places, but many are higher).
2. Since 1977, commercial property owners have had strong incentives not to sell, but rather to employ various lease and other mechanisms for property use that retained the original owners' low property tax bill. While hard to quanitify, I assume these are non-trivial
3. Proposition 13's assessments on property owned by individuals are heritable. I inherited a house from my father, and still pay 1977 rates, 10 years after my father passed away. Needless to say, I have a strong incentive to keep the house and rent it out.
4. Finally, the numbers on county finance bely your claim. The state has steadily increased its share of expenses once paid for by county property taxes, notably public schools. California's public schools were among the best funded in the nation in 1977 (I benefited!). Now they are among the 3 or 4 worse funded, by state, down with Louisiana and Alabama. This is a real difference, yet even so, the state is sending billions of dollars of general fund revenue to the counties and town to run public schools.
In short, Proposition 13 had major effects on the allocation of the tax burden (more on wage earners and consumers, less on holders of capital), and also had major effects on the available funding, moving California from a high-services state to one with potholed roads, miserable public schools, and a public university system whose per student funding has dropped 40% just in the last 10 years alone.
Again, it's possible to debate the details, but to write an entire article in the LA Times on the subject of public services' decline in California since th 1960s that simply ignores Prop. 13 is mendacious, in my view.
March 1, 2009 9:07 PM | Reply | Permalink
PS: one more detail. RS says: "people transfering property since that time do not have the property tax relief the proposition created."
This is not correct. Any time since 1977 when real estate was purchased, it was reassessed at cost, but that assessment has increased since (except when real estate prices drop) at no more than 1% a year. This remains true: there was not some kind of 'one-time' locking of existing assessments in 1977.
Any year that real estate price growth or inflation exceeds 1%, the counties have captured only a fraction of the increase. This may have some fairness regarding the price growth, but not regarding inflation, which has been over 1% most years.
(By the way, I'm not sure, but I don't think there's a negative ratchet effect in years, such as 1993 or 2008, when real estate prices go down. The property can be reassessed downwards and taxes decrease, and RS is correct that this has exacerbated the situation for the state recently. But the 'maximum assessment' keeps increasing by 1% a year even in years when values go down, I think, and if inflation or price increases resume, assessment increases can be larger than 1% until they reach the 'maximum'. But I could be wrong on this.)
March 1, 2009 9:13 PM | Reply | Permalink
I cannot help but notice that you ignore another major factor - the fact that California has let in so many poor, undereducated Mexicans with little earning power, who use social services but pay realtively little in taxes.
March 1, 2009 9:26 PM | Reply | Permalink
Care to prove that..... What social services would they be using that taxes pay for?
March 2, 2009 1:57 AM | Reply | Permalink
Glalvester's point is worth considering. The analyses I have seen (sorry, can't link offhand, and no doubt the details are contentious) seem to suggest that for California, there is a modest fiscal negative for undocumented aliens: the income taxes and Medicare they pay (with some of the latter coming back to the state) are less than the calculated cost of the services they consume.
Naturally, it's hard to pin down either the exact number of individuals, the amount they pay in taxes and fees, or what services they consume (do we include a pro-rated share of highway costs? how many of them send their non-citizen kids to school, etc.) -- lots of variables, and lots of uncertainty. The state also pays for the incarceration of undocumented criminals while the federal government fails to act on their cases, I understand.
And on the other side, the exact contribution to the economy of California by undocumented workers has benefits beyond the taxes they pay, which are equally difficult to quantify. Do we count a share of the income taxes paid by contractors and owners of garden businesses, who operate largely with undocumented labor? How much fiscal benefit comes from manufacturing in LA county that survives in this location by using some proportion of undocumented labor? Not to mention the entire farm sector, a very significant part of California's economy.
On the basis of my very incomplete knowledge, I would guess that undocumented residents in California may be a modest fical drain, but also a substantial economic spur. In any event, it's hard to imagine that they alone are a very important net cause of California's fiscal woes when such obvious factors as intense and uneven property tax limitations are visible. For Glalvester to make his case, I'd want to see a much more detailed argument, rather than the blanket claim that is so often heard by nativists.
April 12, 2009 3:44 PM | Reply | Permalink