Is California’s ‘third rail’ still the kiss of death?

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A union official was once reportedly asked what exactly it was that he wanted. The questioner was not talking about the goal in some particular political battle, but the end game. The union guy’s answer is one that anyone who “negotiates” with California’s voracious public-sector unions needs to keep in mind. What is it you ultimately want? The answer: “More.” That same answer could be offered by the Democratic leaders who run our state.

Session after session, California’s leaders find new taxes to raise. There’s never enough money to pay for all the social programs they desire — not just for the citizenry, but for anyone who might happen to be here legally or otherwise. Indeed, the single-payer healthcare proposal that actually passed the state Senate would have crushed the entire state budget, even by the Legislature’s own analysis. Any resident would be entitled to “free” medical care even if they wandered here last week. This would certainly have provided a new spin on the term “medical tourism.”

Someone needs to pay for this. And someone also needs to pay for all those six-figure public-employee salaries, pensions, and pension-spiking gimmicks. Someone needs to pay for throngs of highly paid Caltrans workers who, according to a state audit, have little to do. Someone also has to pay for a needless $68-billion high-speed rail system and that needless $17 billion project to bore twin tunnels underneath the California Delta and that needless mini state-based Social Security system that’s meant to deal with the common folks’ “pension envy.” (I know, legislators promise that the latter won’t burden taxpayers.) That someone is, of course, us.

California already has some of the highest tax rates in every conceivable category. We also have some of the very worst public services in the country, but that would never cause anyone in charge to say, “Hmm, I wonder why that’s so. Maybe more money won’t improve our roads and schools.” But such a statement would require the public official to believe that the purpose of all that spending is to actually provide public services. They just want more.

There is one area where California’s tax rate is relatively low. That’s our property taxes. We still pay extremely high property taxes because the property values here are so high, but our rates are relatively low and increased assessments are limited. We could thank Howard Jarvis and his 1978 tax revolt, which also helped spur the tax-cutting Reagan revolution.

At the time, home values were soaring and so were assessments. Older people on fixed incomes were literally being taxed out of their homes because of the skyrocketing tax bills. Opponents of Proposition 13 predicted that it would destroy the state by robbing it of revenues, but overall state collections have done extremely well in the ensuing years. But the 1 percent cap on a property’s valuation has made the cost of owning residential and commercial property at least predictable. Increases also are limited to 2 percent a year, but of course the locals can further boost their own property taxes by approving local bond measures.

Prop. 13 has long been considered the “third rail” of California politics, much in the way that Social Security has been considered the third rail of national politics. Voters will put up with just about anything as long as you don’t hammer them with a massive property tax increase or cut back on their retirement payments. That’s the thinking.

The unions and legislators (but I repeat myself) still blame Prop. 13 for why our dams are crumbling and the roads are congested and the schools turn out legions of illiterates. They simply ignore overwhelming evidence that the real cause of public service “crowd out” is the unsustainable pensions and Lamborghini-quality medical care paid to government workers and retirees — and all the union work rules that protect incompetents and miscreants.

For years, activists have been eyeing the gutting of Prop. 13. They never get anywhere because the public has still appreciated the tax savings. But California’s homeownership rates are plummeting as home prices soar into the stratosphere. Again, that’s a problem of liberal policy. Properties are unaffordable because of all those growth controls that have slammed the door shut on new building even as people continue to have kids and move here. My fear: If fewer people own homes, fewer will care about protecting Prop. 13.

Here we see that one liberal aim could help achieve the other. We might get to see in November 2018 whether my fear is warranted. A group of liberal activists including the League of Women Voters is circulating an initiative that would close a “loophole” in the state’s property tax system. Essentially, the proposal would remove Prop. 13’s tax protections for many commercial and industrial properties — thus leading to an $11 billion property-tax increase, according to one study. I assume by loophole they mean anytime we get to keep our own hard-earned cash.

The initiative is similar to legislation from 2015 that failed to make it through the Legislature. Such a large tax increase would harm the state’s already atrocious business climate. This is known as the “split roll,” and a wise person would conclude that the tax hikers — in their endless zeal for “more” — will be coming for residential protections next. (Of course, that would be one way to deal with high property values. We haven’t had a real-estate crash for nearly a decade.)

“One of the biggest myths surrounding Proposition 13 is that homeowners are subsidizing the property taxes of business,” wrote Orange County Taxpayers Association President Carolyn Cavecche in an April column in the Orange County Register. State tax data “show that in 1979, just after Proposition 13 was passed, the tax burden borne by homeowner-occupied property was 41.8 percent.” In recent years, that number is down to 38.2 percent.

But that’s a rational argument. Public-sector unions and liberal groups simply want more money to spendon themselves and their favored programs. They simply want more.

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