Publication Date: Wednesday, November 23, 2005
Board of Contributors: Today's 'elephant in the living room' is Prop. 13
Board of Contributors: Today's 'elephant in the living room' is Prop. 13
(November 23, 2005) by Debbie Mytels
With neighborhood coffees and candidate forums now over, hopefuls for the Palo Alto City Council have stopped wrangling about the usual issues such as the budget, the need for affordable housing and branch libraries.
No one seemed willing to acknowledge that these issues are unsolvable, given the current rules under which local government must operate.
Whether it's the call to preserve sales tax revenue by building an auto row in the baylands or close library branches, Palo Alto finds itself caught in a conflict between our deepest values and providing public services on an tight budget.
But there's an unmentioned "elephant in the living room," the thing that's creating all this difficulty: Proposition 13, the 1978 measure that tightly restricted local taxes. Weekly columnist Nancy McGaraghan bravely pointed out (Weekly, July 20 and Aug. 17, 2005) the inequities between long-time homeowners and those often younger families who bought their homes since 1978.
Yet she only touched on one problem this law has inflicted on us.
It's time to start looking at the bigger picture, and seek solutions to the elephantine mess of California's tax system. The answer is to find a way to ensure that all sectors of society pay a reasonable share to provide for our common needs.
Prop. 13 stopped runaway taxes fueled by the hyper-inflated property values of the 1970s, but with time its negative effects have grown more apparent -- and more severe.
Perhaps the worst effect is that schools and cities can no longer set tax rates to meet local needs. While local taxes can only be raised by a difficult two-thirds vote, the only sure way that local governments can increase revenue is to increase the volume of sales tax from local retail sales. Thus the civic love affairs with otherwise garish auto rows, and the bribe-like inducements cities give to big box retailers.
As for housing, there's more property tax revenue to be had from starter castles, so cities go along with NIMBY neighbors who want high-end housing rather than lower-cost, affordable developments.
Cities such as Palo Alto, squeezed by high employee pension costs and a recessionary-level drop in sales tax revenue, struggle to make painful budget cuts despite the affluence of our citizens. But rather than saying "there's nothing we can do about it" and accepting the "need" to close branch libraries and put up lights to illuminate Beamers in the baylands, it's time for Palo Alto's elected officials to exercise proactive leadership.
Rather than being trapped inside the box created by Howard Jarvis, our new and old council members should stand up and say: "We have to lead a fight against Prop. 13. It's made local government impossible!" If we're going to have a decent city -- a city that provides the services its residents need, expect and deserve -- then we are going to have to change California's outdated and jerry-rigged tax system.
But as McGaraghan found out, many people have a vested interest in keeping their low, Prop.13-protected tax rates. I'm one of them. As a homeowner since 1970, my property tax bill last year was about one-tenth that of my next door neighbors who live in an identical house other than a slightly different remodeling. They've lived there more than five years -- so I could find even more inequitable comparisons by checking recent buyers through the County Assessor's website, www.sccgov.org.
Yet the burden need not fall on pre-1978 neighbors, seniors or someone on a non-profit-organization salary (like me) -- we just cannot shoulder the frightfully high taxes that go with today's inflated real estate values.
So Prop. 13 reformers should highlight another of its insidious consequences: the so-called "property tax shift," which hits young families particularly hard and provides a hidden subsidy to California businesses. Before Prop. 13, industrial and commercial properties in the state paid about 75 percent of property taxes while residents paid about 25 percent. In the years since, this ratio has flipped -- homeowners now pay about three-fourths of the property tax bill.
This terrible inequity happened because under Prop. 13 reassessment happens only when a property is sold. Residential properties typically sell every five years, thus triggering a reassessment and a higher tax bill. Business properties rarely change ownership. Even when a corporation is bought out, the title to the property usually stays the same. Although some businesses complain that California is "unfriendly," in reality the state is a property tax haven.
Recognizing the actual source of inequity, it's time for local government leaders to help create a statewide coalition of all who care for the common good. Who better than senior public servants like some of our current council members -- who have struggled with this monstrous elephant in our midst?
Throughout the state, local officials, school superintendents, teachers, PTA members, public health workers, police and firefighters, and others have witnessed and struggled with the erosion of California's essential public services. All can join in common cause with the young families burdened by inequitable property taxes.
Seniors and long-time homeowners can join, too, because the goal will be to split tax rolls and charge businesses their fair share rather than suddenly jacking up residential taxes on those who can't afford them.
Yes, businesses will complain -- and some may fight back with ad campaigns and lobbyists -- but how many will really leave the world's sixth largest economy?
Responsible businesses, such as the members of the Silicon Valley Leadership Group, are already deeply concerned about the deterioration of California's schools and other public services, as expressed in the group's recent report, "Projections: Silicon Valley 2006," at www.svlg.net.
Rebalancing California's tax system is essential to restoring quality of life in Silicon Valley and throughout our once-golden State.
What's needed is leadership. Will any of our newly elected council candidates -- and their mentors on the council -- actually dare to start talking about this elephant in our civic living room?
Debbie Mytels is a Midtown resident and associate director of Acterra: Action for a Sustainable Earth. She can be reached at earthdeb3@yahoo.com.
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