COMMENTARY | COLUMNISTS | RICHARD RIDER

A defense of Prop. 13 property tax revenues

When it comes to gathering sufficient property taxes, Prop. 13 is no problem at all -- except for profligate spenders. Look at the history of our San Diego County -- a history that pretty much reflects the history of property taxes in the urban/suburban counties that hold over 90 percent of California's population.

According to the San Diego County Tax Assessor, in 1977 -- the year before Prop. 13 took effect -- our countywide property tax revenue was about $639 million. For this past June 30 concluding the 2009-10 fiscal year, our county assessor reports revenues of $4.596 billion. For every property tax dollar collected in 1977, the county this last year collected $7.20.

During that time frame, our county population has grown about 85 percent, and inflation has gone up about 260 percent. Hence property tax revenues today are substantially higher than the bloated pre-Prop. 13 year, even after adjusting for inflation and population growth.

According to the Tax Foundation, for 2008, California was ranked 14th highest in per capita property taxes (including commercial) -- the only major tax where we are not ranked in the worst 10 states. But CA property taxes per home were the 10th highest in the nation that year. See taxfoundation.org/taxdata/show/251.html and taxfoundation.org/taxdata/show/1913.html.

(To see how California ranks against the other states on various taxes and other economic factors, go to: RiderBlog.NotLong.com and read the latest updated version of my fact sheet, "Breaking Bad -- CA vs. the other states.")

But there's another advantage of Prop. 13 few understand.

It turns out that, under Prop. 13, property tax revenue is far more stable than our other forms of tax revenue. Income tax revenue is plunging, and sales tax collections are dropping.

But property tax revenue seldom goes down at all. Since the year Prop. 13 passed, San Diego County property tax revenue has always gone up -- every year -- until this 2009-10 fiscal year.

The San Diego County assessor reports that real estate property tax revenue for the fiscal year ending June 30, 2010 is down -- but only 1.0 percent. This tiny drop comes in the fourth year of California's real estate meltdown. The year before, real estate property tax revenue was actually up 4.1 percent.

Revenue is up because Prop. 13 has the little-known added benefit of smoothing out real estate property tax revenue from year to year. Most properties this year (generally those purchased prior to 2003) had their property tax go up 2 percent. Add to that the resales, property improvements and new structures (which establish new tax assessment levels), and the revenue stayed rather constant in the teeth of our economic downturn.

Consider what happens without Prop. 13 protection: In the real estate boom years from 1998 through 2005, property taxes would have soared. (Even with the Prop. 13 limitations, San Diego County property tax revenue collection during this period still rose 111 percent.) But then in the last four years, without Prop. 13 our dropping property values would have caused a dramatic plummet in property tax revenues -- revenues that governments would now be hooked on -- just like we see with our volatile sales taxes, and especially with our erratic income tax revenues.

Whatever problems you might think Prop. 13 causes, insufficient property tax revenues is not one of them.


Rider is chairman of the San Diego Tax Fighters.

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1 UserComments
Jennifer 1:07pm September 3, 2010

Massachusetts did a much better job of capping taxes without destroying public schools. MA capped tax growth at 2-1/2%, but kept assessments fairly apportioned among property owners. Prop 13 means that families buying their first home pay 10X what renters next door pay. Prop 13 allows commercial landlords to hide ownership changes -- free riding. MA didn't hand control to the state government to decide where taxes were spent, but kept tax apportionment at a local level.