Some Unlucky Numbers for Opponents of Proposition 13

by Don Boudreaux on June 11, 2009

in Myths and Fallacies, Taxes

According to now-conventional wisdom, one of California’s big problems is Proposition 13.  Passed in 1978, this Proposition strictly limits increases in property taxes in California – a restriction that those who are Conventionally Wise assert fuels California’s fiscal problems.  For example, here’s Harold Meyerson writing last month in the Washington Post:

To understand why the woes of California’s economy threaten the nation’s, we must understand the state’s road to insolvency. The Age of Reagan did not commence with the Great Communicator’s inauguration in 1981. For its real beginning, we need to go back to June 1978, when Californians went to the polls and enacted Proposition 13.

By passing Howard Jarvis’s malign initiative, California voters reduced the Golden State to baser metal.

Well, turns out that Proposition 13 is an unlikely culprit, as Paul Jacob argues here.

The percentage increase in property-tax revenue reported in the article that Jacob links to is overstated, as the dollar figures from which it is calculated appear to be nominal rather than real (that is, these numbers do not appear to be adjusted for inflation).  Still, adjusting for inflation, although it changes the magnitude, does not change the conclusion.  In real dollars, property-tax revenue in California (between 1980 and 2007) rose by 170 percent (compared to a 58 percent increase in that state’s population over the same time period).
A fuller post on this topic would examine also what happened over these years to other sources of revenue for government in California – especially to revenue from the Golden State’s income tax.  But I’m too busy now to explore this question.  (I would be surprised if these other sources of revenue did not also rise, in real terms, so that the total take of revenue by government in California is now higher today than it was 30 years ago.)


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