Prop 13 Then and Now

Until the mid 1960s California, particularly Southern California, practiced massive housing discrimination against blacks and Latinos.

“In the years following World War II, African Americans found themselves confronted with increasing patterns of housing segregation. They were excluded from the suburbs and the real estate industry, which severely restricted educational and economic opportunities. In 1963, the California Legislature passed the Rumford Fair Housing Act, which outlawed restrictive covenants and the refusal to rent or sell property on the basis of race, ethnicity, gender, marital status or physical disability. 

“In reaction to the law, a well-funded coalition of realtors and landlords was determined to protect white neighborhoods and property values. They immediately began to campaign for a referendum that would amend the state Constitution to protect property owners' ability to deny minorities equal access to housing. Known as Proposition 14, it was passed by 65 percent of the voters.”

After the passage of Prop 14 it was possible to again allow landlords to do anything they wanted, including tearing up contracts and raising rents or evicting tenets whenever they felt like it.  

In 1967, in Reitman v. Mulkey, the U.S. Supreme Court confirmed the decision of the California Supreme Court in 1966 and ruled that Proposition 14 had violated the 14th Amendment of the United States Constitution. Prop 14 was dead. Or was it?  

The rural areas of California in the 1960s, particularly in the Central Valley, the Salinas Valley and the Imperial Valley had become ripe for a new Civil Rights movement. Farm workers were being paid subsistence wages, forced to live in shacks without running water, and were being poisoned by pesticides, herbicides and fungicides. On August 22, 1966, Cesar Chavez announced the formation of the United Farm Workers Organizing Committee. Over the next ten years, and confronting the violent opposition of big land owners, the United Farm Workers led by Chavez was able to organize and win contracts for agricultural workers all over California.  

By 1976 two powerful Civil Rights groups were in place, one in the countryside and the other in the urban areas. Also in 1976, one of the youngest governors ever elected and only the third Democrat in the 20th Century was ensconced in Sacramento. The stage was now set to push forward a progressive agenda for California, and the California Republican Party was watching carefully and they were not pleased.  

The Republican Party’s answer to the progressive threat was Prop 13. Prop 13 was a perfect example of something profoundly thought through. Prop 13 was a marvel for its sophistication at a deeper political level and its simplicity at the shallow public level. 

Prop 13 was a reaction to the Civil Rights struggles of the 1960s. Unitil the mid 1970s there were two reactionary political forces operating in California, neither of which had much in common. By the mid 1970s, these two different and powerful reactionary currents merged around Prop 13. The progessive forces that had defeated them in the 60s were now being targeted. 

The front men leading the charge to pass Prop 13 were Howard Jarvis and Paul Gann. Jarvis, for years, had been a lobbiest for the Los Angeles Apartment Owners Association in Sacramento. The L.A. Apartment owners were some of the loudest opponents of the Rumsford Fair Housing Act. Gann was rabidly anti-tax. Both men portrayed themselves as small government conservatives fighting for the little guys who were being steamrolled by big government. Jarvis and Gann were telling the people of California one thing, but they were quietly fighting for an entirely different class of people. 

By 1978 California homeowners were seeing their property taxes sky-rocket. Many believed, particulary the World War II generation, that higher and higher property taxes were going to drive them out of their home at a time when many were nearing retirement. Both the Democrats and the Republicans at the federal and state level swept under the carpet the fact that the failure to pay for the Vietnam War was driving inflation, which in turn drove up property taxes which were, inturn, indexed to home valuation. Jarvis and Gann were able to sell Prop 13 to the vast majority of the voters, who were angry and frightened and ill-informed homeowners unaware of the furtive loop holes contained within Prop 13. 

Prop 13 had two historically devastating effects on public policy in California. The first was political and the second was economic. Politically, Prop 13 mandated that to pass a tax increase in California a two-thirds super majority was required. In addition Prop 13 also required a two-thirds super majority to pass the yearly California state budget. In practice that meant 26 Republicans from mostly rural and inland districts in a California Assembly numbering 80 members, and/or 13 mostly rural and inland Republican Senators in a 40-member Senate could veto all fiscal policy in the state. And that is precisely what California Republicans did, causing massive gridlock in the California legislature for the next 35 years. 

Economically, Prop 13 reduced property taxes by more than 50 percent and froze property taxes at that level, only allowing small increases overtime. But there was a mega loop hole in Prop 13, which said if a family or individual sold their property and bought a more expensive property the sellers would lose their Prop 13 tax reduction. Jarvis and Gann were well aware that most Californians sold their homes and bought up every five to seven years. In other words, it was inevitable that property taxes would raise to their pre-Prop 13 levels. On the other hand, the big corporate famers in the Central Valley, the Salinas Valley and the Imperial Valley alongside big corporate property, mining and industrial interests who tended to hang onto their income property saw their property taxes drop.  

Another big loop hole in Proposition 13 was that as long as the property stayed technically deeded to the corporation, ownership of the property could effectively change without triggering Prop 13's provisions. Corporations could sell their property to other corprations, but unlike home owners they got to hang onto their Prop 13 tax break--a great deal according to the Prop 13 law.

There can be no doubt that Prop 13 was a massive Trojan Horse. Hidden within Prop 13 were provisions designed to give disproportionate political power to the declining California Republican Party. In one fell swoop the politically progessive advances of the 1960s and 70s were rolled back by an obstructionist and reactionary Republican Party minority in Sacramento. At the same time Prop 13 allowed big corporate land and real estate interests to increase their profits by reducing substantially their tax responsibilities. Before Prop 13 corporations paid about 45 percent of California taxes. After Prop 13 corporate taxes fell to 8 percent. And Prop 13’s wreckage did not end there. Before Prop 13 California schools were some of the best in the United States. After Prop 13 they became some of the worst.