Voters in California have passed Proposition 13, the Jarvis-Gann property tax initiative. At one stroke they have amended the state's constitution to limit property taxes to one percent of market value, roll back assessments to 1976 levels, and require a two-thirds vote of the legislature to increase any state taxes and a two-thirds vote of the people to raise local taxes. The implications of this smashing victory for taxpayers are far-reaching.
To begin with, from start to finish Proposition 13 was a grass-roots effort. Mad as hell and not wanting to take it any more, Californians in record numbers signed petitions needed to get the measure onto the ballot. Altogether, 1.5 million signatures were collected; only 500,000 were needed.
The campaign was conceived, managed, and financed by individuals, acting on their own. The state's entire establishment came out against Proposition 13—incumbent politicians of both parties, public employee unions, the Bank of America, the major public utilities, the Business Roundtable, the League of Women Voters, the major newspapers. But it didn't work.
Early in the campaign Democratic Assembly Speaker Leo McCarthy addressed a gathering of citizens, warning them in somber tones about the inability of local government to function if 13 passed. Before he could finish he was drowned out by cheers and applause.
That incident is typical of the way in which California politicians misread voter sentiment. People were crying out not for tax reform—a mere shift of the tax burden—but for tax relief, i.e. a reduction in the size and cost of government. As one letter writer to the San Francisco Chronicle put it: "We want only the most necessary government 'services.' We want an end to the countless layers of useless bureaucracies. We refuse to pay any longer for the parasites who are feathering their own nests directly out of our pockets."
Fundamentally missing the point, the governor and the legislature tried to buy the people off with a substitute measure. The Behr bill would have provided modest property tax reductions (for home-owners only) and a weak spending limit—but as legislation rather than a constitutional amendment, it could have been changed or repealed by a simple majority of the legislature. Moreover, in order to grant tax reduction only to residential property, the constitution was to have been amended by the accompanying Proposition 8. This would have permitted, for the first time, a split roll, with industrial and commercial property taxed at higher rates than houses. The result would have been far higher taxes on businesses and apartments, further worsening the state's business climate and pushing high rents still higher.
Armed with Proposition 8 and the Behr bill, the establishment unleashed an incredible smear campaign. Outright lies became the order of the day. The Los Angeles Times, California's largest and most respected newspaper, carried a series of editorials completely distorting the facts. Repeatedly they charged that schools and city and county governments would "suffer a 57 percent reduction in income" if 13 passed. In fact, they will only lose 57 percent of their property tax revenues. Sales tax, gasoline tax, and other revenues are unaffected. Thus, actual cuts will average around 12 percent for cities, 15 percent for counties, and 30 percent for schools—a far cry from the scary figures the Times put forth.
Other opponents stooped to statistical propaganda tricks. Since commercial and industrial property makes up 65 percent of the total assessed value, 65 percent of the dollar savings from 13's across-the-board cuts will accrue to owners of these properties. But apologists for big government stated this as follows: Business and landlords get 65 percent relief, homeowners get 35 percent, renters get nothing. The clear implication was that "business" was getting a larger percentage reduction than homeowners and renters.
Opponents of 13 even tried to use the "taxes will increase" ploy to defeat this massive tax reduction measure. Legislative liberals introduced a package of huge tax increases aimed at "offsetting" the lost property tax revenues. And other opponents calculated the amount of increased income taxes Californians would pay due to having lower itemized deductions for property taxes—a mere $655 million compared with a $7 billion saving on property taxes (but presented in isolation, it sounded ominous).
But the harder they pushed such arguments, the more alienated the voters became. As election day approached, each successive survey showed higher and higher support, culminating in the 65 percent majority at the polls.
Even before the vote the beneficial effects of Proposition 13 began showing up. City councils and county supervisors for the first time took a serious look at where the citizens' money was going—and started making cuts. Many proposed user charges for recreation programs, so that only those using them would pay. Others heard presentations from private companies offering to take over paramedic services for one-third or one-fourth the cost of fire department paramedics. Citizens began suggesting that trimming of street trees be done by the adjacent property owners instead of by the city, and parks cared for by neighborhood volunteers. The city of Manhattan Beach abolished its property tax altogether, without waiting for the election results.
The passage of Proposition 13 demonstrates to the rest of the country that something can be done about soaring taxes. Despite the best efforts of big business, big labor, and big government to deflect this revolt into a tax shift or defuse it by token relief, the California grass roots could not be dissuaded. Government has very nearly become their master instead of their servant—and they know it. What they have done—in defiance of nearly "everyone"—is to say NO and stick to it.
Proposition 13 is just the first step. Similar property tax limitation measures are pending in seven other states, and state tax limitation petition drives are under way in 27. All are fueled by the same underlying realization that government has gotten out of hand, that taxation must be limited.
Advocates of liberty should take advantage of this anti-tax climate. Whenever possible they should seek to discredit taxation in principle, explaining why extracting money from people by force is wrong and providing practical alternatives. Many of the services provided by local governments can be done as well or better by the private sector. Some can be handled by volunteers. Those that people insist be provided by government can be charged for, so that only users pay for them.
Two centuries ago our forefathers dumped tea into Boston Harbor, rather than pay tax on it. Californians have taken a similarly rash—but necessary—action against taxes. Their act of rebellion could be the spark that kindles as fundamental a change as the Boston Tea Party 205 years ago.
This article originally appeared in print under the headline "California Tea Party".