Prop. 13 Overhaul Puts California Taxpayer Protections At Risk

May 8, 2015 By Rob Lapsley and Jon Coupal 4 Comments

prop 13The presidential election in 2016 is will be a defining generational election for California’s future. Just as we are coming out of the recession, efforts are now underway by special interest and public employee unions in Sacramento to raise $20 billion in new taxes to fund increased benefits for their members.

These new taxes will likely be advanced through at least four separate statewide ballot initiatives, from oil taxes to property taxes in order to fund major increases in teacher and state government salaries, pensions, and increased health care costs.

Thanks to hard-working California taxpayers from all income levels, our current state budget is in the black with an annual surplus of almost $2 billion. An additional $20 billion in new taxes will negatively impact our current recovery for small businesses, jobs and our overall economic competitiveness.

One initiative that is currently being pursued will strike at the heart Proposition 13, one of our most important tax protections for homeowners and businesses.

That initiative is called split roll — a $6 billion to $10 billion tax increase that would result from changing Proposition 13 so that commercial property is reassessed every year, affecting the rent payments of every small and minority-owned business and non-profit foundation in California.

The California Tax Reform Association, California Calls and Evolve have spent the past two years advancing the idea that commercial property should be taxed at a much higher level than residential property, which would not only be the most significant change to Proposition 13 since 1978 but would be the largest property tax increase ever proposed.

These groups argue that Proposition 13 should be changed because a few clever investors use tax lawyers to pursue loopholes to avoid reassessments in large, complex property transactions.

Since this was not the intent of Proposition 13, we joined together and sponsored a reform bill last year to prevent any potential abuses in these transactions. AB 2371 was authored by the chair of the Assembly Revenue and Taxation Committee, Raul Bocanegra, and San Francisco-area Assemblyman Tom Ammiano and supported by a broad coalition of business and taxpayer organizations. Most importantly, we also had the support of the California Tax Reform Association (who is pursuing the split roll initiative) as it passed overwhelmingly off the Assembly floor.

But then a strange thing happened on the way to the Senate. The California Tax Reform Association suddenly flip-flopped and withdrew its support in the Senate, saying that AB 2371 was not real reform after all. Why? Because they realized that taking care of a potential problem would actually create a bigger problem for their political agenda to pass a split roll initiative next year. The California Tax Reform Association and other groups want to preserve the “loophole” issue as one of their key messages in the 2016 campaign.

Numerous studies have shown just how bad higher commercial property taxes would be for California. Studies by former Legislative Analyst William Hamm and Dr. Steven Frates, president of the Center for Government Analysis, show a loss of 400,000 jobs and real hardships imposed on the monthly rents paid by California’s small, minority- and women-owned businesses.

If our state budgets already have a $2 billion surplus then why would you raise taxes again?

The predictability of property taxes under Proposition 13 is one of the best advantages homeowners and businesses have in high-tax California. Now is not the time for a massive and arbitrary increase in property taxes unless our goal is to drive more companies and jobs to leave.

We stand ready with legislation to fix any abuses and we stand equally ready to fight any effort to change Proposition 13 that would raise property taxes for hard-working Californians.

Rob Lapsley is President of the California Business Roundtable. Jon Coupal is President of the Howard Jarvis Taxpayers Association.

Originally published in the Los Angeles Daily News.

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Follow the Big Money as it Ripples Through L.A.

March 23, 2015 By Joel Fox Leave a Comment

Los Angeles’ major daily newspapers this weekend each had separate stories that reflected big money in Los Angeles and, in a way, the two stories are connected.

The Los Angeles Times reported than many Silicon Valley entrepreneurs were spending big bucks for Los Angeles area real estate. We’re talking on the high end about $70 million for a custom mansion in Beverly Hills. One realtor said the techies are buying second, third or fourth homes on the West Side of Los Angeles and the beach communities in the $2 to $5 million range.

The Los Angeles Daily News reported on the top salaries of employees of the Los Angeles Unified School District. The article focused on the dismissed Superintendent John Deasy and his $440,000 paycheck. Of note, number five on the list was an elementary teacher who took in $235,000, much of it in unexplained “back pay.” The top ten annual salaries were at $200,000 and above.

Infusion of high tech money into the real estate market means increased property taxes for Los Angeles County. It also makes you think of the trouble long time residents would be in with their property taxes if the pre-Prop 13 property tax system were in place. Dramatic increases in property sales prices would ripple through the community increasing property valuations and thus taxes for all.

The top dollars for educators comes with an additional price tag. Teachers’ union officials, currently in tough negotiations with the LAUSD over pay increases, will use the information about top administrators’ salaries in their quest for more money. High pay for administrators and wage increases for teachers will lead to larger pension obligations for the district.

Will the buying splurge and increased housing payments raise enough tax revenue for the schools to offset the teacher salary demands and increased pension obligations? It’s all connected. My suspicion is the school demands for money will still fall short of the new revenue so the debate over more taxes will continue.

Originally published by Fox and Hounds Daily

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Split Roll Debate Continues

March 8, 2015 By Joel Fox 3 Comments

While supporters of changing Proposition 13 to increase taxes on commercial property usually focus on raising the tax rate or frequently reassessing property, UCLA Law School professor Kirk Stark has a different idea – broaden the base of business property taxes by reassessing more often but at the same time lower tax rates on property and other business taxes. Stark made the proposal yesterday in Los Angeles at a panel discussion on the split roll that also featured Jon Coupal, president of the Howard Jarvis Taxpayers Association and Gina Rodriquez, Vice-President of the California Taxpayers Association. The event was sponsored by the Bisnow website, which covers people and projects in the commercial real estate business.

Stark suggested reassessing property on a regularly scheduled basis but lowering the 1% tax rate, eliminating property taxes on business equipment and reducing other business taxes. Stark said his goal was to harness the impulse to tweak Proposition 13 and gain sound tax policy rather than ratchet up the tax burden.

However, proponents of the split roll are after more money and lowering a series of other taxes doesn’t fit into the game plan. Nevertheless, Stark’s proposal in another in a line seeking changes to Proposition 13.

Cal-Tax’s Rodriquez argued there was no need to change any aspect of Proposition 13. She said there has been no shift of the property tax burden from commercial property to residential property, citing the fact that residential properties which claim the homeowners exemption saw property taxes increase by 6.8% since Prop. 13 passed compared to commercial property increasing 7.3% over the same period.

Rodriquez added that under Proposition 13 property tax is the most stable tax in the state and it produces growing revenue for local governments.

Jon Coupal from the Howard Jarvis Taxpayers Association agreed, pointing out that assessor officials around the state noted that because of the Proposition 13 tax system, which produces steady rising revenue even during difficult economic times because of the way it functions, counties were spared “horrible damage” during the Great Recession.

Coupal said California government is not starving for revenue, as tax increase proponents would have you believe. He said California has the highest income tax in the nation, the highest sales tax, the highest gas tax even before the inclusion of cap and trade fees and property taxes that are ranked in the top half of all states.

The issue of when a business property changes ownership triggering a reassessment of property under Proposition 13 received much attention during the discussion.

Stark complained that the Prop. 13 system allows legal entities to own commercial property making it difficult to determine a change in ownership. He mentioned the highly publicized case of a Santa Monica hotel purchased by computer entrepreneur Michael Dell, his wife and others without anyone getting 50-percent of the purchase denying a change of ownership reassessment which a court found legal.

Coupal told of a legislative bill authored by two Democrats last session aimed at reigning in abusive transactions under change of ownership statutes such as the Dell case. The bill failed, Coupal said, because public labor unions urged defeat of the bill as they want a full-blown split roll to change Prop. 13, not a corrective fix of the statutes.

Coupal argued there are no loopholes in Prop. 13 as critics charge. Proposition 13 calls for reassessment on change of ownership. The legislature wrote the rules on how that occurs, so legislative statutes are at the center of the change in ownership discussion, not the article put in the constitution by Prop. 13.

Originally published by Fox and Hounds Daily

Joel Fox is editor of Fox & Hounds and President of the Small Business Action Committee.

(Full disclosure, I am a member of Californians to Stop Higher Property Taxes)

Follow Joel Fox on Twitter @1JoelFox1

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A Short History of Proposition 13

January 30, 2015 By Joel Fox 3 Comments

(Note from the author): Proposition 13, the 1978 property tax measure, continues to be in the news in California with talk of reforms in some quarters. Just this week, the Public Policy Institute of California polled some issues related to Prop 13. The poll found that 66% of likely voters found Prop 13 to be a good thing for California. That included 78% of Republicans, 62% of Independents, and 58% of Democrats. With 13 still making news in California, it is probably an opportune time to publish the text of a speech I gave a few months ago on the history of Proposition 13.)

Let me take you back to 1966 to Newhall, California right here in Los Angeles County, to an item that appeared in the local Newhall Signal newspaper. It came with a picture of an elderly couple standing before their house. It would not be unkind to call it a shack. The house was assessed for taxes at the property’s highest and best use, a standard used by assessors at the time. Since an apartment building had been built close by, this elderly couple’s home was assessed as if an apartment building was built there. The couple’s tax bill, in 1966 dollars, was $1800 a year. Their total income was $1900 a year.

Four years earlier, a retired, civic minded, combative businessman, Howard Jarvis began an effort to reform the property tax system. He said he worked with “ordinary people” to do something about taxes. He called it “grand felony theft” when people, like the Newhall couple, lost their homes to the taxman.

And he wasn’t alone in protesting outrageous taxes. Remember this was about the time George Harrison wrote, and the Beatles’ sang, Should five percent appear too small, Be thankful I don’t take it all, Cause I’m the Taxman.

Howard Jarvis worked 15 years on property tax reform. He submitted or worked on a number of initiative proposals that either didn’t qualify for the ballot or were defeated at the polls.

Meanwhile, the situation got worse. What happened was property values were increasing dramatically in the 1970s—kind of like now. Property taxes are a function of the tax rate and the value of the property. If the tax rates were not adjusted but the property value increased, taxes zoomed up.

In some instances people bribed assessors to keep their property values low and reduce their taxes. Some assessors were caught and they went to prison – one committed suicide. Officials decided something had to be done. They computerized assessments so when a property sold all the property around it would automatically have their assessments increased and their taxes increased with the increased valuation.

In San Francisco, bumper stickers soon appeared that read: “Bring back the crooked assessor!”

Speaking of San Francisco, one San Francisco government official told the San Francisco Chronicle that before Prop 13 ‘the mayor had a relatively easy job, you just add up all your revenues and all your expenses and then you just SOCKED it to the taxpayer.’

That was the environment when Howard Jarvis and Paul Gann combined to get a record number of signatures for Prop 13, in every county, practically all through volunteer signature gatherers.

Many members from both political parties and most of the state’s special interests from business to labor opposed Prop 13. Yet the fund raising was fairly even. The No side had more, and they got it in large donations, but the many small donations from homeowners offset the large donations enough to keep the Yes on 13 side in the game.

Milton Friedman, the Nobel Prize winning economist, made a television ad for Prop 13. Ronald Reagan did a radio ad. Reagan’s radio ad said Prop 13 would protect the American Dream. Marty Anderson, Reagan’s chief economist for the 1980 presidential campaign, told me once 13 passed it gave the Reagan campaign impetus to make taxes a lead issue in the presidential campaign.

While the other side may have had more money, the campaign was high profile and the media helped. KABC-TV in Los Angeles held a debate on the news for 5 to 10 minutes every night for weeks. Howard Jarvis taking on all comers.

It wasn’t a fair fight – for the other guys. Jarvis said, “When you see politicians and bankers and union leaders standing together against something you’re for, you know there is no way in the world you can be wrong.”

Prop 13 passed two to one on Election Day, June 6, 1978. It capped the property tax rate, allowed a limited increase for inflation, reassessments on sale of property, and required a supermajority vote in the legislature for state taxes and a vote of the people on local tax increases.

It was challenged in the courts, of course. The California Supreme Court said it was constitutional…that the acquisition value system—taxes are set when you acquired the property—was reasonable and fairer than the system in place before 13.

But that wasn’t the only court challenge. In the early 1990s, a Prop 13 case made it to the United States Supreme Court.

This delighted the folks who had longed hope to see the end of Prop 13. The Long Beach Press editorial the morning of the hearing before the U.S. Supreme Court cried, “Off with its Head!”

Didn’t work out that way. As with the California Supreme Court, there was only one dissenting vote against Prop 13.

Justice Harry Blackmun, who wrote the majority opinion, found Prop 13 was constitutional, that the state had a legitimate interest in neighborhood preservation and stability and could set tax laws to discourage rapid turnover of property in homes and businesses to discourage displacement of mom and pop stores by newer chain operations.

Blackmun also wrote that someone acquiring property doesn’t require the same protection as someone who owns property and could be subjected to jarring tax increases.

The case against Prop 13 was based on the issue that side-by-side similar properties pay different taxes. Renowned economist Adam Smith in his work, Wealth of Nations, said certainty in taxation was much more important than equality. However, I prefer how a writer in a Northern California newspaper put it. Proposition 13 reminded her of her grandmother’s quilt. It is made up of different patches but sewn together it keeps everyone warm.

Even with Prop 13 upheld by the courts it comes under constant attack as you know.

From the ridiculous – a track coach said his shot puts were lost in tall grass because the grass was not cut as frequently because of Prop 13, to the more serious, when the Bakersfield Californian newspaper asked: Is Proposition 13 killing children because we don’t have enough measles serum in this county? To the editorial cartoon in the Los Angeles Times after the Loma Prieta earthquake in the Bay Area that showed a car crushed by a freeway and the license plate read, Prop 13. And my favorite in the New Republic, which said the reason O.J. Simpson was found not guilty in his criminal trial was because of Proposition 13. The reasoning was that because of the tax cuts Los Angeles city and county did not have the funds to hire competent police and corner officials. No matter that at that time, LAPD officers were paid more than police in New York and Chicago.

Which is why Howard Jarvis created a taxpayer organization, the Howard Jarvis Taxpayers Association, to carry on the fight and the defense of Prop 13. As Howard used to say, “A ship can’t sail on yesterday’s wind.”

Prop 13 was revolutionary because for the first time it gave certainty to the taxpayer instead of the tax collector.

Finally let me close with the following assessment of Prop 13 when it hit it’s 20th anniversary: “Proposition 13 is 20 years old and it’s time to proclaim the tax cutting measure a stunning success. The brainchild of Howard Jarvis and others has been vilified by critics for two decades and blamed for much of what ails California. But, at the heart of it, the measure did exactly what Jarvis promised …Proposition 13 provided a substantial and permanent reduction in soaring property tax levels and brought stability to a tax system that had been rife with corruption and subject to the volatile whims of the housing market.”

So said the Editorial in —ready for it –the Los Angeles Times!

Originally published on Fox and Hounds Daily

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What California Homeowners Should Know About the State Budget

January 20, 2015 By Jon Coupal 2 Comments

Let’s be honest.  When politicians and pundits discuss the state budget, very little is about the impact on homeowners.  Notwithstanding the fact that a person’s home is their most important asset, this lack of perspective is understandable.  When people think about political issues impacting their status as homeowners, they are far more likely to focus on local taxation – fees for utilities, parcel taxes, local bond debt, etc.

But state finances in California can – and do – have a profound impact on one’s status as a homeowner and, unfortunately, it is rarely in a good way.  First, homeowners should be aware that there is no bright line between local governments and the state.  State laws on school finance, redevelopment, law enforcement, natural resources and transportation have a huge impact the budgets of cities, counties and special districts.

Take schools, for example.  Because of California Supreme Court rulings in the 1970’s, local school districts have lost a great deal of local control over their budgets.  (Contrary to urban legend, loss of local control had very little to do with Prop 13).  Much of K-12 funding now comes from the state.  And the amount of that funding has a lot to do with whether a local school district is “rich” or “poor.”

The complexity of the relationship between state and local governments leads some to tune out issues about the budget believing that it is not relevant to their lives.  That would be a big mistake.  Homeowners should be aware that this year’s proposed budget reflects a significant five percent increase over last year.  Not only has state spending increased every year except one during the recession, that spending has gone up 30% in five years.  California now has a $113 billion general fund budget and that doesn’t even include special funds and money from the federal government.

One of the driving forces behind higher state spending is an effort by Governor Brown and others to corral the massive obligations to the state’s pension funds and government retiree healthcare.  Brown should be applauded for his efforts to reduce debt but some of us can’t help but feel he is trying to remove sand from a beach with a pair of tweezers.  California’s accumulated debt in all forms is staggering.  In a recent piece in the Wall Street Journal, Steven Malanga of the Manhattan Institute noted how unfunded pension costs, not just in California but nationwide, are gobbling up all of the new revenue coming in to state and local governments from the economic recovery and higher taxes.

And some of those tax hikes in other parts of country are huge.  But here in California, we already have the highest income tax rate, the highest state sales tax rate and the highest gas tax in America.  In short, the tax and spend lobby is running out of options.  So who is the last remaining target?  You guessed it:  Homeowners.

And the only thing standing in their way is Proposition 13.  While other states have some limited protections for homeowners, none are as effective as California’s landmark Proposition 13.

Homeowners need to be on guard.  All those proposals to lower the 2/3 vote on local parcel taxes and bonds repaid only by property owners are just the beginning.  As the demands to make good on California’s hundreds of billions worth of debt become clear, those who are blessed with home ownership need to pay attention, not only to local politics, but to the state budget as well.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article was originally published at HJTA.org.

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Revising History to Fool Taxpayers

December 16, 2014 By Jon Coupal 5 Comments
After Joseph Stalin took the reins of power in the Soviet Union in the mid 1920’s, his image suddenly appeared in paintings of important meetings of the Bolshevik revolutionaries – which was odd because he had attended virtually none of them. Later, after each successive Stalinist purge, group photos that included previously prominent, but now ostracized, imprisoned or executed communists, would be scrubbed, so as to appear that they had never existed.
Of course attempts by politicians to rewrite their history go far beyond just doctoring paintings and photographs.In Washington, D.C. we have the curious case of Jonathan Gruber. During the run-up to Obamacare, both then Speaker Nancy Pelosi and President Barack Obama sang the praises of the roll that MIT professor of economics Jonathan Gruber had played in crafting the legislation. Gruber has been described as the architect of Obamacare and, before that, the similar Romneycare in Massachusetts.Recently, videos surfaced online showing economist Grubber telling groups that the healthcare law had been written specifically in a way to deceive the “stupid” American public so that it would not be clear that it actually contained massive tax increases.When confronted with this evidence, now Minority Leader Pelosi, who famously said that lawmakers had to pass Obamacare to find out what was in it, did her best impression of a deer in the headlights and denied any knowledge of Jonathan Gruber. The president acknowledged Gruber, but dismissed his influence as an insignificant. Both Pelosi’s and Obama’s efforts to downplay Gruber’s role in drafting the Obamacare is so easily disproven by the facts that even the most left leaning journalists are incredulous.

In the recent California General Election, we saw almost humorous efforts by some candidates, who in the past opposed Proposition 13, to recast themselves as champions of the taxpayer protecting measure.

Perhaps the most egregious example occurred in Orange County, where former Assemblyman Jose Solorio was seeking a state Senate seat. Knowing the district included many homeowners, he tried to campaign as a protector of Proposition 13. He was even able to persuade Jerry Brown to record political ads intended to verify Solorio’s Proposition 13 credentials.

Sadly for Solorio and his band of revisionist historians, the Assembly keeps careful records and it was easy for taxpayers to document that he had voted more than once for measures that would have undercut Proposition 13’s taxpayer protections. With the truth out, his candidacy was overwhelmingly rejected by voters.

The lesson here is that when any politician makes claims about his or her record, because of the internet, voters can quickly check to see if they are being told the truth, or if, like Jonathan Gruber, the office seeker believes the public to be stupid.

Revisionists rely on deception and obfuscation. To expose them, it is therefore necessary for the majority of voters to have access to the truth and have the skills to discern its importance. In the words of Thomas Jefferson, “If a nation expects to be ignorant and free in a state of civilization, it expects what never was and never will be.”

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published at HJTA.org

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For What Are Taxpayers Thankful in 2014?

December 4, 2014 By Jon Coupal Leave a Comment

“In this season of Thanksgiving, please don’t blame taxpayers if they are distracted by the injuries being perpetrated against them by our political class.”  These words were the preface of this column at the beginning of the holiday season in 2008 and, sadly, little has changed.  In fact, in many ways taxpayers are worse off now than they were then.

Six years ago, California’s tax burden was ranked 6th nationally.  Today we trail only New York as the worst state for taxpayers.   We now rank first in state sales tax, first in marginal income tax rates, first in gasoline tax and, even with Proposition 13, we rank in the top third in per capita property taxes.  Because Proposition 13 makes it harder for California to overtake New York as our nation’s number one taxpayer hell, one can expect new efforts by Sacramento politicians to undermine its protections in the new legislative session.

Some of our state leaders like to chirp happily about California’s declining unemployment rate, but only three states are worse off and our 7.3 percent rate is much higher than the national rate of 5.8 percent.  Still, all these figures are suspect because they do not count the discouraged who have stopped looking for work entirely.  And even those counted include many part-time workers for whom the best holiday gift would be finding fulltime employment.

Then there is the constantly growing, and largely ignored unfunded pension liability now estimated at several hundred billion. It stood at $6.3 billion just a decade ago.  As more government workers retire, this debt will come due and will have to be addressed by either reduced public services or tax increases or both.  The pressure for new revenue to support the retired workforce will provide an additional incentive to politicians to demolish Proposition 13’s taxpayer protections.

Nonetheless, while elected officials may be planning to put coal in taxpayers’ stockings as we approach Christmas, there are a few things for which we can all be grateful.

First is Proposition 13, which limits annual increases in property taxes and forces the tax raisers in the Legislature to get a two-thirds vote of their colleagues to raise state taxes.   We at the Howard Jarvis Taxpayers Association hear daily from those who are thankful for Proposition 13 and credit its most famous feature — limiting annual property tax increases to no more than 2 percent — for allowing them to keep their homes.

While during the session just passed, those favoring new taxes dominated the Legislature, the November election has turned out some fiscally irresponsible lawmakers and replaced them with some who understand the detrimental impact of new taxes on individual taxpayers and the overall economy, and who are likely to reject new taxes.  So taxpayers are grateful not only for Proposition 13 but for lawmakers who will defend their interests against great pressure for new taxes from special interests including public employee unions.

Taxpayers are also thankful for all individuals, regardless of party affiliation, who make the personal sacrifice to run for office and present their ideas to voters.  A functioning free republic relies on individuals who are willing to step into the arena, even in those instances where their chances of prevailing are small.

Finally, complaints against government at all levels are an American birthright.  But we are mindful that billions of souls around the world risk imprisonment or death for speaking out against their despotic governments or leaders.  So, in keeping with the season, let us be thankful that we live in a country that, despite her faults, remains the last, best hope for mankind.

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Californians Vote for More Taxes and More Borrowing

November 13, 2014 By Ed Ring 3 Comments

It has been argued that California’s voters defy their political stereotype when it comes to taxes. California’s property tax revolt in 1978 resulted in the passage of the historic Prop. 13, which limits property tax increases to 2 percent per year. As recently as 2009, California’s Legislature joined with Gov. Schwarzenegger to place Propositions 1A through 1E on the state ballot. All of them would have raised taxes, and all of them were defeated by voters.

That was then.

In 2012 Californians voted to raise sales and income taxes through Proposition 30, which supposedly was designed to collect an additional $6 billion per year to fund public education. And while 2014 did not include major new tax proposals on the state ballot, in cities, counties and school districts throughout California, tax and bond proposals were placed before voters. Most of them passed.

In the June 2014 primary, 47 local bond measures were proposed, with 36 of them passing. Also in June, 44 local tax increases were proposed, and 36 of them passed. That was just a warm-up for the November 2014 election, where 118 local bonds – most of them for public education – were proposed, along with a staggering 171 local tax increases. At last count, 72 of the bond proposals were passed, 15 were defeated, and 31 remain too close to call. Of the 171 local tax proposals, 98 were passed, 45 were defeated, and 28 are still too close to call.

These local tax proposals are necessary to meet runaway employee compensation costs, especially for pensions. These local bond measures are largely to fund deferred maintenance, activities that might have been funded through operations budgets if it weren’t for excessive compensation and benefit costs.

In Stanton, a city where local firefighters average $221,000 per year in pay and benefits, and local sheriffs average $112,000 per year in pay and benefits, a 1 percent increase to the local sales tax was approved by 54 percent of the voters. In Palo Alto, where the local firefighters “only” receive pay and benefits that average $181,000 per year, and the local police officers earn pay and benefits averaging $164,000 per year, a 2 percent increase in their hotel tax was approved by 75 percent of voters.

In California in 2014, based on returns so far, if a local city or county wants to raise taxes, there is a 72 percent chance voters will approve them. If a school district wants to borrow money – over $11 billion just this November – there is an 81 percent chance voters will approve them. And if the proponents of more taxes and borrowing are unlucky, they can always try again the next election. The odds are in their favor.

Local taxes and borrowing matter. California has relatively decentralized governance. Of the roughly $430 billion in estimated state and local spending in California for the fiscal year ending 6-30-2015, only $107 billion of that is state government spending. Estimating total state and local government debt in California is nearly impossible because the largest single borrower, K-12 school districts, have not submitted their financials to the State Controller for consolidation since 2002. But a California Policy Center study from April 2013 estimated total state debt from all sources at $132 billion, whereas the same study estimated total local government debt in California at over $250 billion. That estimate relied on 2011 and 2012 data, grossly underestimated K-12 bond debt, and did not include any unfunded liabilities for pension and retirement healthcare.

When it comes to taxes, borrowing, and overspending, most of the action in California is at the local level. And there should be no question that current spending levels are financially unsustainable. If all California’s state and local pension systems had to do was account for their liabilities according to the same rules that have governed private sector pension plans for years, California’s state and local debt – including unfunded liabilities – would be well over $1 trillion. Moreover, such reforms – playing by the same rules as the private sector – would grossly increase the ongoing normal cost to funding pensions for state and local government employees.

Sooner or later California’s taxpayers are going to wake up. Because the Government Accounting Standards Board, Moody’s Investor Services, and eventually the U.S. Congress, are being compelled by financial reality to enact reforms to pension and retirement healthcare accounting, asset management, and funding. Once government entities have to follow the same rules as the private sector, spending will skyrocket or services will be scuttled. What we’ve seen so far, grievous though it may be, is nothing compared to what is to come.

There is an alternative. A bipartisan will to defeat government unions by an awakened populace. It may take a few more years, but it is inevitable – the hidden agenda behind all of these tax increases and new borrowings will be plain for all to see.

Ed Ring is the executive director of the California Policy Center.

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Reprieve for Prop. 13

November 11, 2014 By Jon Coupal 3 Comments

By now, most Californians have read dozens of analyses from experts and partisans alike about the meaning of last Tuesday’s election. Analyzing the national scene is not rocket science.  Republicans romped and Democrats took a shellacking.

But understanding the impact here in ever-so-blue California is a bit more complicated.  While it is true that Republicans, who tend to be more taxpayer friendly, did not win a single statewide seat, the news for fans of Proposition 13 is actually quite good.

Rather than focus on the statewide races, the Howard Jarvis Taxpayers Association was laser focused on using our political muscle to prevent the tax-and-spend majority party from securing the dreaded two-thirds supermajority in both the California Senate and Assembly.  The reason why a two-thirds supermajority is so dangerous is two-fold.  First, under Proposition 13, taxes imposed by the state cannot be imposed without the two-thirds vote.  As long as the minority Republicans hold firm against tax hikes, Californians will be protected.  (And it’s not like California needs higher taxes.  We already have the highest income tax rate, the highest sales tax rate and the highest gas tax in America).

Second, it takes a two-thirds vote of each house to place a proposed amendment to the California Constitution on the ballot.  Had the majority party achieved the supermajority, it could have placed anti-Proposition 13 measures on the ballot at will.  But, because the Democrats were thwarted in their efforts, they will have to convince their political allies – principally the public sector unions – to spend several million dollars to collect the necessary signatures to qualify such a proposal.

Another observation about this year’s election is that, as if there were any doubt, the branding of Proposition 13 has never been stronger.  Both true Proposition 13 defenders and pretenders used Proposition 13 as a talking point in their campaigns.  Turns out that those candidates who were true Proposition 13 defenders – meaning they had the endorsement of the HJTA Political Action Committee – did very well.  So much, in fact, that most of the endorsed candidates won, even those whom the pundits thought had little chance of victory.

That Proposition 13 itself was such a centerpiece of this election cycle is astounding.  This landmark measure was on the ballot more than 35 years ago and yet incumbent legislators who had bad Proposition 13 votes while in the Legislature suddenly felt vulnerable.  A former legislator who was openly anti-Proposition 13 lost badly to an HJTA endorsed candidate, Janet Nguyen, in a contested Senate seat.  Her opponent, Jose Solorio, was in such deep trouble that Governor Brown cut one of his very few television ads this election cycle in a failed attempt to save him.  As in 1978, Jerry Brown was bested by Proposition 13.

But to those who think that these political victories allow us a chance to rest, think again.  Already, the enemies of Proposition 13 are conducting extensive political research – both polling and focus groups – to determine how best to dismantle these critical taxpayer protections.  And left leaning anti-taxpayer groups have intensified their efforts to convince local governments and school district boards to pass anti-Proposition 13 “resolutions.”  These resolutions may be non-binding, but our adversaries are laying the groundwork for a repeal of Proposition 13 in 2016.  That much is very clear.

But for now, let’s enjoy the victories just achieved.  Just in time for the coming holiday, taxpayers and homeowners in California have much to be thankful for.  And while we realize our reprieve will be short and that we must prepare for battle anew in a few short weeks, these victories give us the much needed hope that California can, once again, become the Golden State it once was.

 Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published on HJTA.org

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Greater Transparency on Threat to Property Owners

October 7, 2014 By Jon Coupal 1 Comment

Legislation just signed by Gov. Brown may help alert homeowners to the threat posed by per parcel property taxes. Parcel taxes have become one of the most insidious threats to home ownership because they can be imposed over and above the property tax limits set by Proposition 13.

Supported by a broad coalition lead by the California Taxpayers Association and the Howard Jarvis Taxpayers Association, Assembly Bill 2109 requires the Controller to maintain a publicly accessible data base relating to the imposition of locally assessed parcel taxes, including the type and rate of a parcel tax and the number of parcels subject to or exempt from the parcel tax. Finally, taxpayers will be able to see the extent of parcel taxes throughout the state and the costs to property owners.

Parcel taxes came about as a result of politicians never ending effort to circumvent the property tax limitations contained in Proposition 13. Howard Jarvis and Paul Gann, Proposition 13’s authors, intended that taxes on property be limited to one percent of the taxable value and that the taxable value on the assessor’s books could not be increased by more than two percent annually.

To squeeze more from homeowners, local officials came up with the parcel tax, usually a uniform tax placed on each parcel of property within a community –although it can also be based on size. By imposing a uniform charge for the privilege of owning property within a community, they were able to persuade the courts that it did not violate Proposition 13’ prohibition against additional ad valorem (value based) taxes.

Parcel taxes are extremely regressive, bearing no relationship to ability to pay. The young couple in a starter home, the elderly couple in a bungalow and a multimillionaire in a mansion, all pay the same amount. There is no restriction on the dollar amount of these taxes that exceed Proposition 13’s limits, or on the number of such proposals that can be placed on the ballot. And while bonds — also paid for by property owners — must be used for “brick and mortar” construction, parcel taxes can be used for any purpose including increased pay and pensions for government employees.

Adding insult to injury, there has been a major push in the Legislature to reduce the two-thirds vote needed to approve parcel taxes. Although this would clearly undermine Proposition 13 by making it easier to increase property taxes, backers of a lower approval threshold respond innocently, “We are not trying to raise taxes, we are just making the process more democratic.” The threat of course is that by making it much easier to impose new taxes on property owners, home ownership could again be threatened as it was prior to Proposition 13 when taxes were going up so fast that many owners were forced to give up their homes.

Thanks to Assembly Bill 2109, more attention can be brought to the burden that parcel taxes impose on California homeowners and it will help make the case that not only should they be defeated individually as they appear on the ballot, but they should be banned outright.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article originally appeared on HJTA.org

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