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To understand the effects of Proposition 13 on the California school system, we must first understand what Proposition 13 is. We must also briefly glance at the events leading up to Proposition 13, also known as the Jarvis-Gann initiative. Proposition 13, adopted on June 16, 1978, is an amendment to the Constitution of California. It forever changed Californian property laws and sent massive shock waves across other state governments. The sound roaring out of the West- what was it? A California earthquake?
A Pacific tidal wave threatening to sweep across the country? Literally, it was neither; figuratively, it was both. That angry noise was the sound of a middle class tax revolt erupting... Time, June 19, 1978 Before Proposition 13 - The Tax Revolt There are 2 factors that stand out when striving to understand the brief history of Proposition 13. These factors include the unusual economic conditions of the late 1970 s and the ineffective political leadership of that era. The economic conditions present in that era, different than those of prior eras, were a major contribution to the tax revolt of the late 1970 s.
Incomes, which were on the rise throughout the post-World War II period, began to decline in 1973. At the same time, government spending was experiencing a period of steady increase. Prior to 1973, both government spending and income experienced a period of steady increase. Throughout the 1960 s, there were no fluctuations in the percentage of income taken as taxes by both state and local governments, although income and spending grew at an increased rate. But government spending in California continued to grow 30 percent faster than did income throughout the 1970 s.
The public sector was now feeling the effects of inflation on tax revenues. Rising prices began to increase sales tax revenue, while rising money incomes skyrocketed taxpayers into unwanted higher tax brackets. However, real incomes had not increased at all. Local governments now experienced a huge increase in state income tax. The sudden increase in single-family home values caused homeowners property taxes to rise. At the same time, poor economic conditions held business property tax rates steady.
California taxpayers paid 12. 7 percent of their income in state and local taxes in 1970. By 1978, this number had risen to an astounding level of 15. 8 percent. Besides the aforementioned economic hardships, the failure of state government to provide tax relief before 1978 was an important cause of the publics disillusionment with its political leaders. Disagreements arose among liberal legislatures, their conservative counterparts, and Governor Jerry Brown over the amount of tax relief and the extent to which it should be directed to families.
Governor Jerry Brown never increased taxes while in office, his main failure was hoarding. He was suspected by the Republican state legislature of allowing the state surplus to build up in order to provide the taxpayers a tax rebate during his campaign for reelection. Rather than giving back to the taxpayers, he accumulated an inflation-fed revenue surplus generated by the Reagan-era tax system. Partisan disagreement, along with a lack of political administration leadership, left tax relief at a standstill.
Inflation filled the states treasury with a huge surplus. Looking back at the 1970 s, it appears to be an era of true taxation without representation. Inflation forced an increase in property values at a rate nearly three times the national average. Single-family residential property assessments increased by 110 percent during this period, while business property values remained steady with a change of only 26. 4 percent.
Although property tax rates dropped modestly, it was not enough to make up for the tremendous increase in assessments on single-family homes. The share of assessed property value borne by single-family homeowners rose from 32 percent in 1974, to a level of 43 percent in 1979. The amount borne by businesss dropped during this period. Citizens of California were being abused by the tax system, and little relief appeared in sight. Despite the failure of the state legislature to effectively represent the citizens of California with a property tax relief, it was not guaranteed that Howard Jarvis Proposition 13 would pass. The aforementioned economic hardships and ineffective political leadership seemed to ring home with California voters.
They had little choice but to fight back by voting for Proposition 13. Unfortunately, the real message was sent to city hall, not Capitol Mall; to the schoolhouse, not the Statehouse. The Property Tax System- Incidence and Efficiency Effects The property tax plays a major role in local public finance- it generally accounts for about 75 percent of local governments tax revenue. The United States accumulated about $ 178 billion in property taxes in 1992.
The state system collected 7 billion of these dollars and local governments about 171 billion (U. S. Department of Commerce, 1996). The amount of property tax an individual is responsible for is the product of the tax rate and the property's assessed value- the value that the local jurisdiction assigns to ones property.
Generally, local jurisdictions assign a value relatively close to the market value. Often times the tax collector must make an educated estimate based on the value of similar properties sold on the market recently. The accuracy of the tax collectors estimate determines the amount that the market and assessed values differ from each other. The assessment ratio, is the ratio between the assessed value and the market value. Effective tax rates are the same when the properties have the same statutory rate and the same assessment ratio.
This case generally doesnt occur because tax collectors do not assign a very accurate value. Therefore, properties with the same statutory rate have very different effective rates. In the United States, thousands of jurisdictions operate their systems independently. There are many arguments about just what types of property should not be included and what applied rates are given. Throughout the nation many religious and nonprofit organizations voluntarily contribute property taxes. In some communities, tax rates are preferentially handed out to businesses, mainly to persuade outside businesses to locate to that area.
As seen in Table 1, effective rates differ from city to city throughout the United States. There is controversy surrounding who exactly bears the burden of the property tax. There are three different views that apply when looking at the incidence of property taxes. The first is the Traditional View: Looking at property taxes as excise taxes on land and structures. The incidence of the tax depends on the supply and demand schedules. The supply and demand schedules can differ, depending on whether youre talking about land or structures.
The extent that the amount of land is fixed means that the supply curve is perfectly vertical. Because this factor has such a supply curve, it will bear the entire burden of the tax applied to it. As seen in Figure 1, Sl is the supply of land. Before the tax is applied, the demand curve is Dl, and the equilibrium rental price is Po.
The implementation of an ad valorem tax on land- a tax with a rate given as a proportion of the price, moves the demand curve down to Dl. The rent that the landowners receive, Pn, can be found at the intersection of the supply curve with Dl. The rent paid by the users of the land can be seen by adding the tax per acre of land to Pn, giving us Pg. The rent being paid by the users of the land remains unchanged by the tax (Pg = Po); the rent received by the owners of the land, falls by the full amount of the tax. Hence, the landowners bear the entire burden of the ad valorem tax on land. Often times prospective buyers of land consider the fact that if they purchase the land, they also are purchasing future tax liabilities.
Its because of this simple fact that the value of the land to the prospective buyer decreases at the time of pu...
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Research essay sample on Proposition 13 And The California School System
