Where Would We Be Without Prop. 13?

Wednesday, July 31, 2013

Page 3

IN MY OPINION (Column)

Where Would We Be Without Prop. 13?

By JON COUPAL

CHICAGO: Mayor warns property taxes could be going up 150 percent.

Suppose the mayor of your city announced a property tax hike of 150 percent or, stated another way, two-and-a-half times your current tax. A homeowner accustomed to paying $2,000, would see their next bill increase to $5,000, while a bill of $4,000 would jump to $10,000. Coincidentally, these amounts roughly approximate the average property tax rate in California just prior to Proposition 13’s passage in 1978—a tax burden so high many homeowners were forced out of their homes.

An increase of this magnitude may sound farfetched, but not to Chicago Mayor Rahm Emanuel, who is seriously warning that in order to pay the mounting bill for government employee pensions—a bill that will triple in 2015 when a balloon payment comes due—property taxes could be forced to go up 150%. Needless to say, Chicago residents are not protected against the arbitrary increase in property taxes, a protection that Californians enjoy because of Proposition 13. Homeowners in the Windy City are entirely at the mercy of government officials.

Although the exodus from California continues unabated (net domestic out-migration of nearly 2 million residents over the last dozen years) it’s a good bet that not many looking for a better life are moving to Detroit, a city whose decline and now bankruptcy have made national headlines. But Chicago is not much better off.

Based on an index that considers problems like violent crime, unemployment, foreclosures, taxes (income and property) and home prices, Forbes magazine ranks Detroit as the most miserable city in America, while Chicago ranks number four. However, before Californians start feeling superior, it should be noted that three California cities—Modesto, Vallejo and Stockton—made the top 10 and there is a good bet that San Bernardino will be included next year.

For most of these troubled cities, government employee pension debt is a major problem that has either pushed them over the edge of bankruptcy, or has them approaching the abyss. And our state, as a whole, is not much better off.

A 2010 study of California’s pension obligations conducted by the Stanford Institute for Economic Research under the direction of Professor Joe Nation, a former Democratic member of the Assembly, showed California Taxpayers are on the hook for over $500 billion in unfunded pension liability.

This debt was created by public officials who promised more to their government employee union allies than they could reasonably deliver and they would prefer that the public remained in the dark about this looming crisis

As these bills are coming due, the Sacramento politicians, most of whom owe their election to the political activism of government employee unions, are already thrashing about trying to find ways to raise revenue. For many, the logical target is Proposition 13’s taxpayer protections.

For taxpayers, Proposition 13 continues to act like a lifeboat in stormy seas. Because of Proposition 13, annual property tax increases are limited and predictable, voters have the right to decide on new local taxes, and the Legislature must achieve a two-thirds consensus to increase state taxes.

Without Proposition 13, Californians could soon experience what it is like to live in Detroit or Chicago, without ever having to leave their homes.