June 4, 2003
This Friday, June 6, marks the 25th anniversary of Proposition 13. This initiative, which was approved by the voters of California on this date in 1978, sparked a "tax revolt" that spread throughout the country and continues to reverberate today, says Bruce Bartlett.
The impetus for Prop. 13 was the inflation-induced housing price boom of the 1970s.
- Investors seeking to preserve their capital poured their savings into tangible assets like real estate.
- With double-digit inflation also pushing up prices, many homeowners suddenly found themselves living in houses worth many times what they paid for them.
- But with property taxes based on assessed values, this meant that tax bills were also rising sharply.
- Since incomes were not rising as fast as prices or taxes, some California homeowners found that they couldn't pay the taxes and were forced to sell their homes.
Howard Jarvis and Paul Gann, leaders of two California taxpayer organizations, joined forces in 1978 to put an amendment to the state constitution on the ballot that would limit property taxes to 1 percent of assessed value in 1975.
Despite a massive advertising campaign against Prop. 13, financed by the state's business community, which almost universally opposed the measure, voters held firm in their support. On June 6, 1978 they backed it by a 2 to 1 margin.
The most lasting effect of Proposition 13 is that it taught Republicans the political power of tax cutting and weaned them from their obsession with budget deficits, says Bartlett. In that respect, its impact continues to be felt 25 years later. Passage of the 2003 tax bill is only the latest example.
Source: Bruce Bartlett, "Proposition 13," National Center for Policy Analysis, June 4, 2003.
Browse more articles on Tax and Spending Issues