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So I got a lot of shit for damning the California Proposition 13. Understandable. Most people would perceive this as a threat to their “home”.. or that I am proposing a bigger government.

Consider this. Local schools are funded by the property taxation revenue. If you live in a shitty neighborhood and thus cheap properties, tax revenue is gonna be small. Thus, decreased revenue for the schools. I am not advocating that more money solves the problem in the US, well California anyway, education system. (In fact, I think more money leads to more problems, even for schools. Instead we should raise standards for teachers and students.)

The current slide in the real estate market is a perfect example of how prop 13. is the dumbest taxation ever. Shrinking property value means shrinking property assessment, thus shrinking tax revenue. During the real estate boom, schools get more money. During bust, they get less.  BUT… do teachers and students need less things or resources b/c the real estate market is sliding? Of course not. Do they need MORE things when the market is going up? Nope.  (Do proponents of prop 13. even think that students even KNOW if there’s a real estate boom or bust?) Take a look at this article:

Declining assessed valuations will have several impacts.

In the 12 counties surveyed, the tax roll was down more than $68 billion combined, which translate into at least $680 million in lost tax revenue at the state’s basic 1% tax rate.

Since that basic rate can’t be adjusted, a declining tax roll will impact general fund revenues for cities and counties.

A declining roll has the potential to affect local school districts and governments that have issued or plan to issue general obligation bonds, which are backed by voter-approved property tax pledges above the 1% rate. It could lead to potentially unpopular decisions to increase the tax rates, or to the deferral of issuance that has been authorized by voters.

A tax roll drop would also roll up to the state budget. The state guarantees minimum per-student spending levels for K-12 education that for the vast majority of school districts is higher than their property tax receipts, meaning lower school district tax receipts could increase the state’s funding share.

Yeap, because of 13, the schools in those counties will get less AND the people there will have to pay more taxes because of idiot, financially illiterate bureaucrat dickwads who don’t understand how debt works… yet decide to put the burden on the people that voted those idiot fatcats into office.

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Let’s face it. California is going bankrupt. I don’t have to put some quote or a link to some article toback my statement. Just turn on TV and listen to California news. (And if you REALLY want third party validation, take a look at this article.) California can’t even issue more bonds because the credit rating for the state tanked. Declining property values and declining employment equals declining tax revenue. And what about expenses? You guessed it. Going up.

So why don’t we get with the times and change? What about proposition 13?

If you are unfamiliar with proposition 13, it’s basically the stupidest real estate taxation law. Ever. Not only that, it’s an outdated law written in 1978.

In essence, Prop 13 limited property taxes in California to no more than one percent of a home’s assessed value. Assessments of property values could not rise by more than two percent per year, unless a property was sold, in which case it could be assessed at a new value. Prop 13 also added a measure which would require a two thirds majority to increase any taxes in California, making it very difficult for the legislature to pass laws to raise the tax rate, even when the state struggled to balance the budget.

Now, let me give you an example.

I had a coworker who live in San Mateo county who inherited a house from his grandparents, who bought the house in the 40’s or something like that. Less than $20k for the house. Guess how much he pays in taxes? Once again, my blog readers are brilliant: 1.25% of something over $20k (there was some re-assessment event). Guess how much the next door neighbor was paying? 1.25% on $600k. Is the house newer? Nope. Exact same layout, same size, same yard. Sure, the appliances are new and there were some updates, but for the most part, same house.

Now, I’m no genius here but I’m certain my ex-coworkers’ kids and his next door’s kids attend schools in same school district. And I’m pretty certain teachers there want to be paid in today’s dollars, not 1940’s dollars. Does my ex-coworker’s kid cost less? Does he eat less? Does he require no books? Do they have gnomes that teach kids in the basement and work for nothing?

What a dumb law. So why wouldn’t politicians change this? Because politicians don’t want their careers to get “electrocuted” to death (according to Wikipedia article):

A large contributor to Proposition 13 was the sentiment that older Californians should not be priced out of their homes through high taxes. The proposition has been called the “third rail” (meaning “untouchable subject”) of California politics and it is not politically popular for Sacramento lawmakers to attempt to change it.

Yes, ladies and gentlemen. The so-called people’s representatives care more about being your representatives than actually representing you.

If the people are “priced” out of homes due to taxes, well, isn’t that what free market economy is supposed to be all about? We’re all subjected to same conditions. Some survive, some don’t. But government cannot incentivize people to not change and to be basically outdated. When I was in track team in high school and got out of shape, I got cut from the team. I didn’t have no proposition mandating that fat, out of shape students cannot be cut from athletic teams. Who cares about the team? The team wants to win as a collective. If the lagger is bringing down the team, not only the coach, but the entire team wants him/her out!

Here’s what I don’t get: politicians don’t mind jacking the taxes on the golden gooses of the economy that actually create jobs - i.e. companies. Yet they care so dearly about this old, outdated crap tax law that only hurts everyone. I’m for cutting taxes but as long as it’s fairly distributed. Prop 13. is an unfair taxation.

Costs go up. That’s a fact of life. The people who support prop 13 are the same people who bitch and complain about how school teachers don’t get paid enough, or how there’s not enough crossing guards near schools, etc. If they want more social services, fork up the dough.

Governator, if you’re gonna retire, take this proposition 13 with you.

[EDIT] Here’s my response to some of these comments.

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