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Proposition 13: The Road to Destruction of the CA Middle Class
Proposition 13 was a statewide ballot measure that passed in 1978. Voters approved the measure with good intentions; at the time, it was meant to provide tax relief for middle class families who owned property and were paying huge amounts of taxes as California property values escalated.
But since 1978, there have been devastating and unforeseen consequences of Proposition 13 that have diminished the California Dream, badly eroded our state’s infrastructure, increased the financial pressure on middle class families and increased the growing inequality between the richest Californians and everyone else.
Also included in Proposition 13 were lower taxes for the state’s most wealthy individuals, as well as, California’s largest corporations. As a result, the middle class is now paying a larger share of the state’s tax burden then ever before, as huge corporations and the wealthy pay a smaller one. According to the California Budget Project’s report, “Who Pays Taxes?” personal income tax filers account for more than 51 percent up from 34 percent in 1980 while corporations paid only 12 percent of the overall taxes owed up from 14 percent in 1980. This means that the cost of running the state of California is increasingly being paid for by individuals rather than by corporations. While California’s corporate profits increased by 192 percent between 2001 and 2009, the total amounts they paid in taxes increased only 68 percent during the same period.
Proposition 13 also allowed for huge loopholes in the tax law that benefit corporate property owners, at the expense of everyone else. Both corporate and personal property taxes are calculated based on the property’s value in 1975, that is until the property changes ownership. For individuals who buy a new house, they must pay taxes based on the value of the house at the time of purchase. Corporations, however, can buy a building by buying the company that originally owned the property and still claim continuous ownership. A May 2010 report by the California Tax Reform Association details how commercial property tax is consistently un- or under-valued: http://www.caltaxreform.org/pdf_ppt/SystemFailureFinalReportMay2010.pdf
Proposition 13 also handcuffed state policymakers to make changes that would meet the needs of the majority of its residents. The law required that a supermajority of 2/3 of the state legislators would be required to pass a state budget or raise taxes, arguably challenging the American tradition of majority rule. As a result, a small group of legislators representing business interests have been able to prevent changes to the tax structure that are more just and would support the infrastructure required to give middle and lower income Californians a chance at the California Dream.
What has been the result? Each year the state of California experiences severe budget deficits that require steeper cuts to schools and vital public services. California schools are now ranked 49th in the nation in terms of per pupil spending. Our state college and university system, which once held out the promise of a free education to every young person who wanted one, are now prohibitively expensive for many of our poorest prospective students. Our ability to care for our elderly and disabled have been diminished to the point of cruelty. In 2012 we face an addition round of nearly $13 billion in cuts, which will probably force K-12 schools to shorten the school year by a few weeks and continue to increase tuition costs at state universities. http://calitics.com/diary/14010/the-dystopic-present-13b-deficit
CAUSE is committed to California tax and fiscal reform, and that means reform of Proposition 13. That also means advocating for passage of slightly higher taxes on millionaires, the creation of a “split roll” for personal and commercial property valuation, and elimination of the 2/3 rule for raising taxes. To join our campaign and fight for fiscal reform, click here
California on the Edge, by California Labor Federation, how Prop 13 has harmed the state: http://calitics.com/diary/13953/california-on-the-edge
More on the impacts of Prop 13 by Chrisopher Palmieri in Bloomberg News:
Impact of Further Budget Cuts to CA Schools, by Dina Martin in Sacramento Press:
Who Pays Taxes in California? From the California Budget Project: http://www.cbp.org/pdfs/2011/110412_Who_Pays_Taxes.pdf
Income Inequality in California, from the California Budget Project: