Tuesday, July 24, 2012

Prop 13 Isn't Choking California

My brother is a standard progressive liberal living in California, and he plans to move to Oregon soon. As California is run by Liberal principles, in large part, I asked him why California is so poorly managed. His answer: prop 13. But he's not a lunatic, Nobel prize winning economist Paul Krugman has made the same argument.

 Prop 13 was a state law enacted in 1978 that prevented property taxes from rising much as long as you owned the property. When you sell it, it resets. While the hope was this would help little old ladies from getting pushed out of their houses, and keep government spending in check, the net result is that with inflation you now have many places where people are living in million dollar homes and paying taxes as if it were only a $100 home. Looking at it differently, they are spending 10x as much as their neighbor on taxes.

 This would fit the narrative that bad things happen mainly because people don't care enough to spend government money on them. That point was made yesterday by the writer John Scalzi, who claimed he owed his success to government in this piece, and noted:
From kindergarten through the eighth grade, I had a public school education, which at the time in California was very good, because the cuts that would come to education through the good graces of Proposition 13 had not yet trickled down to affect me.
But then, per capita spending in California on schooling is higher than anywhere else in the US (see here), and per capita spending has been above inflation plus population growth for the past 20 years (see here). Californians still pay 22% of their income in state and local taxes, compared to 14% for Texas (cite). The beast is not starved. I agree that prop 13 is a rather ham-handed way to implement constraints on spending, and now it's a mess because it creates a very powerful lock-in effect on current property owners. But it has little to do with California's downward spiral, a state that used to be the most educated, prosperous, and beautiful place on the planet, is now near the bottom of state achievement, and their public places (airports, beach bathrooms) are poorly maintained, like the bankrupt state they are.


  1. Anonymous8:30 AM

    The reports of California's death are greatly exaggerated.
    California public schools are still very good. California public places are still very good. The California economy is still very good.
    Your political opinion (or economic disposition) clouds your view of the situation.

  2. FredR9:01 AM

    What is choking California?

  3. Prop 13 is horrible. The proper way for states to finance themselves are property taxes. Tax the fixed factor, land, not the mobile factor, income. The switch from property taxes to income taxes meant state revenues are more elastic with respect to income, which led to the swings in spending. It is awful, you should understand that.

  4. Anonymous1:11 PM

    Eric Falkenstein being lectured by an apparatchik of a disgraced football-factory school... Now I've seen everything, and I can die a contented man.

  5. Anonymous1:56 PM

    Just curious if people are subverting the system there by leasing their homes out to take advantage of their ultra-low Prop 13 taxes? It would seem to be a great arbitrage.

  6. Wow, an ad hominem attack from someone who remains anonymous. What a bold, stand-up person you must be to stand behind your anonymity. What a cool insight you must have to know I must be an apparatchik, and that all the thousands of students and faculty here are worthless. Guilt by association must be an important weapon for someone who comments anonymously.

  7. Anonymous11:32 AM

    Whatever. Point being, please drop the condescending tone, and don't presume to lecture ("you should understand that..") your betters, such as Eric. When Eric comes down in the world to a point he's living in goshforsaken middle of nowhere central PA, then you can resume your snottiness, I guess...

  8. "The California economy is still very good."

    Then why does California have such a high unemployment rate? Or massive budget deficits? Stockton, San Bernardino, Olympia have declared bankruptcy with others coming like Compton. The state's major pension funds, CALPERS, UCRS are underfunded. By what measure is California's economy "good?"