Prop 13

George Lakoff, the famous UC Berkeley linguist, yesterday filed a ballot initiative that would replace California's current requirement of a two-thirds vote to pass a budget or raise taxes with a majority vote requirement.

Lakoff, a progressive, has been active among the various groups who want to change the post-Prop 13 operating system of California, including the 2/3 requirement on taxes and limits on commercial property taxes. It's unclear from his filing whether Lakoff is merely the name sponsor for a bigger effort, or whether he's merely putting down a marker or making a point. (Many, including your blogger, support changing the policy but believe that the politics are too difficult). I've sent the professor an email asking these sorts of questions and will share any response I get.

In my piece today at Fox & Hounds, I recount a 2005 interview I had with the late economist Milton Friedman. A strong supporter of Prop 13 when it was on the ballot, his views on property taxes are relevant to today's California debate about tax reform. The piece is here.

In today's Sacramento Bee, columnist Dan Walters corrects some misunderstandings about Prop 13. Bottom line: Prop 13 underlies California's problems, but its limits on property taxes are not the fundamental problem--it's the way that the initiative changed governance in the state.

In this Associated Press story, California state senator Dean Florez, who represents the Central Valley, compares the passage of last November's Prop 2 -- which imposed new regulations on farm animal confinement -- to the political earthquake of Prop 13. At least the agricultural version of Prop 13.

Florez and the story tout the passage of several animal protection measures by the legislature this year as a reaction to Prop 2, which was sponsored by the national champion of direct democracy, the Humane Society of the United States. Skeptical voices in the story suggest these measures are codifying changes in animal management that the agricultural industry already has embraced.

As Hitchcock knew, the fear of the unknown and the unvisible is the most powerful form of fear. I feel the same way about California. It's hard to know what happens if the special election measure goes down, legislative gridlock returns, and the state's fiscal crisis deepens.

One likely effect: some fairly wild ideas for changing the state will get more attention. Look for more scrutiny of a constitutional convention, the repeal of Prop 13, or even a break-up of the state.Above is a rendering of the two states that would be created under a plan being advanced by Central Valley agricultural interests. This "Downsize California" effort (a link to their site is here) would split the state into Coastal California and Renewed California.

The question of whether Prop 13 was good or bad for California is still a contested one. But that hasn't stopped "anti-tax" activists in Arizona from filing an initiative Friday that is closely modeled on Prop 13.

Like the California initiative, which was approved by voters in 1978, this Arizona measure, if it qualifies for the ballot and passes, would limit increases in property values to 2 percent per year for tax purposes. It also would cap property taxes for residential property at one-half of one percent. That's actually lower than Prop 13's 1 percent limit. What's strangest about this initiative filing is the timing. Prop 13 was designed to put limits on how much your property value -- and thus property taxes -- may go up from year to year. That's not exactly a problem for anyone these days, much less in Arizona, where property values have been in free fall.

Conservatives likely will get behind the measure, but one wonders why. In a 2005 interview, Milton Friedman, the conservative economist, told me that if you're going to tax, the property tax is the least dangerous tax because you don't get less property by raising it. (The same is not true, he explained, of sales or income taxes).  

A Democratic law firm filed  two versions of an initiative Monday with the California attorney general. As Democratic leaders have promised, the initiative effectively would eliminate California's requirement of a two-thirds vote to pass a budget. (Though, for political purposes, the two-thirds requirement would remain in the constitution--new language would merely exempt all appropriations from the two-thirds requirement for approving appropriations. Look for advocates of the initiative to say, over and over, that it doesn't remove the two-thirds requirement from the constitution. Because technically, it doesn't).

One of the two versions of the initiative also would eliminate the two-thirds requirement for raising all taxes (with an exception for property taxes that offers a bit of a nod to Prop 13). Again, this is political. Proponents are cutting the heart out of Prop 13, but they'll be able to say, "What are you talking about? We don't touch property taxes!" It's also possible that by filing two versions, backers are telegraphing a political strategy: they could agree not to take on the two-thirds requirement as it applies to taxes -- in return for support for eliminating the two-thirds requirement on the budget.

California's governor initially indicated he would veto an $18 billion package of cuts and tax increases that had been passed last week by the Democratic legislature on majority vote. But yesterday, he said he had made progress in negotiations with Democrats on the package. Schwarzenegger simply wants a rollback of some laws that he thinks restrain economic growth.

This package, put together by legislative Democrats, is significant not merely as a response to the ongoing state buget crisis. It's a precedent setter because it involves passing a tax increase without the two-thirds vote required under the California constitution. Republicans are crying foul and threatening to challenge the package in court. If Schwarzenegger agrees to sign the legislation after these current talks, you can expect a lawsuit.

That litigation may prove crucial not only to preventing the state from running out of cash in two months. Depending on how the courts rule, it may open up a new era in California's budget politics, providing a crucial loophole around the two-thirds rule on taxes (which was part of Prop 13). The state constitution also requires a two-thirds vote for a budget; that law has been in place since the 1930s.

Today's LA Times story by my longtime colleague Evan Halper makes one thing painfully clear. California's Republican legislative leaders, for all their championing of direct democracy and the rule of the people when it comes to subjects such as Prop 13 (property taxes) and Prop 22 (same-sex marriage ban), are prepared to violate all sorts of voter-approved initiatives to get a budget deal and avoid a tax increase.

Halper got his hands on a memo that details what Republicans are talking about. As Halper recounts the memo's contents, the Republican proposals involve "diverting money specifically set aside by voters for local governments, road and other transportation projects, mental health programs and early childhood education." To give a little history, voters set aside money for transportation via ballot initiative with Prop 42 (2002), for local government with Prop 1A (2004), mental health programs with Prop 63 (2004), and early childhood with Prop 10 (1998). For Republicans to want to raid such funds is hypocrisy. To borrow against such funds in the name of opposing tax increases is dishonest. The act of raiding such funds creates a debt for the state that must be paid back. The very act of raiding the funds is thus a tax increase in disguise.

Check out the latest initiative from Arizona. Currently circulating on those hot, hot desert streets, the proposed measure -- which could make the November ballot -- would require that a majority of all registered voters sign off on any tax increase at the polls.

That's right. Not a majority of the voters who show up at an election. But all registered voters. Staying home would be a vote against.

Deadline to get the signatures is July 3.