A measure backed by the California Teachers Association would extend Prop. 30’s higher tax rates on the wealthiest Californians until 2030, with an estimated $7.5 billion each year going to public schools and community colleges.

 

Another measure, this one by the California Hospital Association and the Service Employees International Union-United Healthcare Workers West, makes those higher tax rates permanent and sends half the annual estimated $10 billion to public schools, colleges and universities, 40 percent to Medi-Cal for low-income health care and 10 percent for early childhood development programs. It also imposes a new, higher tax rate on those who make more than $1 million annually. …

 

[Negotiators] for the teachers group and the hospital association have been talking about a third option, which would extend Prop. 30’s higher tax rates and split the money between schools and health programs. That measure is awaiting approval from the state Attorney General’s Office, and a decision about whether to aim that initiative for the ballot won’t be made until later this month. …

 

“We’d prefer one measure, especially on a crowded ballot,” said Gale Kaufman, a political consultant working on the teachers’ measure. “My instincts say less is better always, but it’s difficult to have any hard and fast rules.”

The focus isn’t just on income tax ballot measures, though they have gotten the most early attention. The Chronicle notes that the Making Poverty History initiative “would add a surcharge to the tax bill for land and buildings with an assessed value of $3 million or more. The $6 billion raised annually would go toward programs to reduce poverty in the state, including prenatal services, expanded child care, tax credits and job training grants.”

Steyer follows Schwarzenegger strategy

Tom Steyer, the billionaire environmentalist who is exploring a 2018 run for governor, also is looking to make a political name for himself with a ballot measure, as Arnold Schwarzenegger did in 2002 with Proposition 49, a successful ballot measure funding after-school programs, a year before the recall election that ousted Gov. Gray Davis.

Steyer is behind the Save Lives California campaign, which would use a $2-a-pack tax on cigarettes to shore up state Medi-Cal funding and to pay for health-promotion and anti-smoking programs.

A previous ballot measure that successfully raised cigarette taxes was also sponsored by a non-politician believed to be interested in running for governor. Championed by Hollywood producer-director-actor Rob Reiner, Proposition 10 added a 50-cent levy on a pack of cigarettes, with proceeds used mostly to fund early childhood education programs.

But Reiner, unlike Schwarzenegger, never ran for state office.

Who is Piketty and why does he matter? His 700-page book, “Capital in the Twenty-First Century,” newly translated into English, is the best-selling book on Amazon. No largely academic book has ever achieved this distinction before.

Piketty’s central thesis is that the world has returned to its pre-World War I norms of extended periods of slow growth that will result in a further stratification of wealth in which the 0.1 percent fare better than everyone else. This is not because of the Occupy theory that the economy is rigged in an evil way to help them. It’s because of Piketty’s theory that during extended periods of slow growth, the mega rich will see their sophisticated investments in capital (stocks and other financial instruments) gain more share of a society’s wealth than everyone else accumulates through their earnings (salaries).

Many economists on the left love this thesis as providing a grand theoretical way to understand how the world has come to be the way it is — a way they don’t like. Paul Krugman leads the way, proclaiming, “This is a book that will change both the way we think about society and the way we do economics.”

It’s gotten respectful reviews from some free-market economists, and some pretty good takedowns, starting with Tyler Cowen’s essay. (Here’s a round-up of links.)

But whether you think it’s hooey or too high-falutin’ or just arcane, if you’re a believer in Proposition 13, Piketty’s emergence gives you fabulous ammo with which to shoot back at the George Skeltons, Peter Schrags and Harold Meyersons — all the lefty pundits who say it is the prime evil force driving California’s downfall. Piketty says states that have property taxes that penalize homowners if their homes increase in value are imposing what amounts to “America’s secret middle-class tax.”

Property taxes (outside of CA) a ‘secret middle-class tax’

This is from a Matt Yglesias piece in Vox:

“Piketty’s big point about the United States is that we actually do engage in substantial wealth taxation in this country. We call it property taxes, and they’re primarily paid to state and local governments. Total receipts amount to about 3 percent of national income. The burden of the tax falls largely on middle-class families, for whom a home is likely to be far and away the most valuable asset that they own. Rich people, of course, own expensive houses (sometimes two or three of them) but also accumulate considerable wealth in the stock market and elsewhere where, unlike homeowners’ equity, it can evade taxation.

“Piketty also observes that the current property tax system is curiously innocent of the significance of debt. A homeowner is taxed on the face-value of his house, whether he owns it outright or owes more to the bank than the house is worth.”

So the next time you face Prop 13 critics, call them “middle-class haters,” and say that’s the view of Paul Krugman’s favorite economist, too. If Piketty’s PR boomlet continues, you can just use his name and skip the Krugman framing.

With or without Piketty, noting that homes are the single biggest repository of reliable wealth for most middle-class families is a strong defense. But if Piketty proves to be the enduring “rock star” of the progressive community that many lefties think, that gives this pro-13 argument way more juice.

Doubt Piketty is the big deal that I say he is? Today’s NYT opinion page has both Krugman and David Brooks weighing in on his book.

The first has to do with its allegedly devastating effect on revenue.

It didn’t turn off spigot

There’s something about Proposition 13 that induces derangement among the political and media establishment in California. You can make an argument, as Joe Mathews has, that using direct democracy to shape key state policies is a formula for straitjacketed government. But then the argument should apply to lots and lots of props, not just 13, starting with 1988’s Proposition 98, which made permanent teachers unions’ dominance of state spending and budget decisions. Why should one result of direct democracy bear the blame for other exercises in direct democracy?

But to argue that capping one source of taxes has ruined the state, as the Peter Schrags and the George Skeltons of the world like to do, is bizarre. By any measure, tax revenue in California has gone up far faster than inflation plus population growth since Prop 13’s adoption in 1978. By any measure, California has among the nation’s highest sales, income and gasoline taxes and the highest corporate taxes in the West. Only in property taxes are we in the middle of the 50 states.

We have enough to live within our means. The only reason it sometimes seems like we do not is because of political decisions that place the interests of public employees ahead of the interests of the public, in pay, benefits, job protections and more.

This is pretty well understood among libertarians, conservatives and small-government advocates.

Not just about limiting taxes; it’s about protecting homeowners

But the second grounds for offering a vigorous defense of Prop 13 is often not appreciated enough by people across the California political spectrum — including its admirers. The measure was drafted and passed in a landslide for a very specific and powerful reason: to protect people from losing their homes or suffering financial disaster because of housing bubbles.

This is from a June 5, 1978, Newsweek story about the mood in California on the eve of Prop. 13’s adoption:

“Shaken homeowners and landlords wobbled out of the country assessor’s office in Los Angeles last week with rebellion in their eyes. In the suburb of Palos Verdes, Don Johnson, a certified public accountant who earns $25,000 a year, returned dumbstruck to his four-bedroom ranch home. When he and his wife, Ellen Ann, bought the home in 1959 — for $33,900 — their tax bill was $600 a year. But inflation ballooned the assessed value of the home, and by last year, the Johnsons’ taxes were $1,593. Last week, the tax man released the latest listings. Overnight the assessed value of the Johnson home has soared to $135,000 and the Johnsons’ taxes threatened to skyrocket to $4,139.

“At the assessor’s office in West Los Angeles, an ashen-faced husband emerged to give similar bad news to his wife, a woman in a matronly blue dress. ‘Sam, Sam, don’t tell me,’ she cried. ‘I’m going to have a heart attack right here.'”

Why can’t members of the political-media establishment (including occasional contrarians Joe Mathews and Dan Walters) grasp that we’d have seen a wave of such stories during the housing bubble from 1998 to 2006 without Proposition 13?

Home prices in some markets nearly tripled over that span.

Retirees, those living on fixed incomes and middle-class families with big mortgages would have been devastated  if their property taxes had nearly tripled. We’re talking about millions of people.

So while we are used to seeing Prop. 13 as an artifact from a distant era, we don’t realize it remains an enormous protection TODAY for current homeowners who can barely make ends meet and who would be ravaged by a huge tax hike.

This may not be central to the fight over whether businesses should be exempt from Prop 13’s caps on how fast property taxes can increase. But it should be central to the broad debate over whether Prop 13 is bad or good for California. During the latest housing bubble, as in all the housing bubbles that preceded it, Prop 13 did far more to protect regular Californians from financial disaster than any other single factor.

That should matter much more than it seems to.

By Chris Reed

The persistence with which George Skelton writes silly, slanted stuff is hard to exaggerate. He only occasionally tells his L.A. Times readers that unions run Sacramento. He is a constant advocate of the Sacramento establishment’s mantra that the main thing wrong with California is our low tax structure, even if our taxes aren’t low. Now Skelton is at it again, depicting 34 percent of voters as a “small minority” in his column calling for “adjustments” to Prop. 13 and an end to its requirement that many taxes can only be approved by a two-thirds vote.

Property taxes are the only taxes in California that aren’t high by national standards. Our income tax is now the nation’s highest and our gas and sales taxes are very near the top, and our corporate taxes are the highest in the West. Meanwhile, our unemployment is the second highest in the state and has been over 10 percent for more than three years, and we’re about to saddle industry (and consumers) with the highest energy costs in the nation.

And George Skelton surveys this picture and concludes our biggest problem is … the fact that one category of taxation in California isn’t among the highest in the nation.

But, hey, he’s got his own grand tradition to uphold. Last December, George wrote a column trashing Jerry Brown for saying in 2010 while running for gov that he wouldn’t back “new taxes unless the people vote for them.”

“This was an unfortunate promise Brown made when running for governor in a too-clever-by-half effort to undercut opponent Meg Whitman’s false characterization of him as a liberal tax and spender. …

“It’s hard to find anyone around the Capitol outside the governor’s office who doesn’t think the promise was wrongheaded.”

Inside George’s bubble, everyone wants higher taxes, you see. Those who resist? They’re a “small minority,” if they exist at all.

George Skelton: Still delivering the big laughs after 50 years on the job!

By WAYNE LUSVARDI AND CHARLES B. WARREN

California’s Proposition 13 is working to halt a larger and faster erosion of the property tax base in Sacramento County and elsewhere around the state.  But that is not what is being reported in the mainstream newspaper media, which only tell a “poor me” story of how property taxes are declining in the Sacramento area.

It is not the superficial absolute percentage of decline in property taxes but the relative decline in relation to the overall decline in market values that is critical.

Property values go up and down in cycles and it is up to government to have rainy day fund reserves to handle the downturns.  Fortunately, with Prop. 13, these declines can be managed. While without Prop. 13, the pain would be much deeper and would likely dig deeper than budget reserves.

For example, the Sacramento Bee is reporting that the Sacramento County property tax base fell by $4 billion for the fiscal year from July 1, 2010 to June 30, 2011, resulting in a 1 percent, or $40 million, drop in property tax revenues.

But Zillow.com indicates that the market value of single-family homes declined by about 16.7 percent from 2010 to 2011 (as of July 7, 2011); and by about 57 percent since 2007 at the peak of the Real State Bubble.  At the market peak, the median home price in Sacramento County was about $350,000, while today it has dropped to $150,000.

Since 2010, the median price of a single family home has dropped by about 16.7 percent.  But due to Prop. 13, the latest decline in the property tax base has been held to 1 percent.

One of the unheralded benefits of Prop. 13 is that it serves as a circuit breaker to large fluctuations in market values, either upward or downward.

Prop. 8 Provides for Tax Adjustments

Proposition 8, passed in 1978, amends Prop. 13 to provide for reductions in assessed property values due to a decline in market value.  Prop. 8 re-assessments are temporary and will ratchet back upward when the market recovers.

Prop. 8 property tax re-assessments do not necessarily have to be applied for by the owner and are automatically adjusted by the tax assessor in each county.  Such re-assessments typically affect so-called “underwater” properties whose mortgages are more than the assessed value for property tax purposes. Zillow.com reports that the percentage of underwater mortgages in Sacramento County is 51 percent.

An “underwater” property is not the same as when the assessor at his discretion may reduce the property value assessment temporarily until the market recovers. If monetary inflation takes off, as predicted by many, there may be a flight of capital out of money markets and back into real estate, at which time assessed values would be readjusted upward by the Assessor, but only for those properties that had their assessment previously lowered under Prop. 8.

Prop 13 is good for government as well as for homeowners.  But don’t expect to read or hear that in the newspaper or broadcast media.