For all of you thinking of owning a home in Malibu, California’s premiere destination, here is the first of a two-part commentary on our real estate tax realities in from California’s most protective organization, the Howard Jarvis Taxpayers Association. 

I think of its president, Jon Coupal, as the very best investigative journalist in all of California, protecting our Malibu rights.

Is Proposition 13 to Blame for California’s Fiscal Crisis? – Part One

By Jason Clemens and Jon Coupal

When California voters approved Proposition 13 by a landslide in 1978 they launched a nationwide revolt for lower taxes.  Critics now blame that revolt for our current fiscal crisis. That charge needs to be considered in the light of actual data about property taxes in California.

Prop 13 limits property taxes to 1 percent of the cash value of property or the market value of a property depending on when it was purchased, with subsequent annual increases limited to 2 percent. Prop 13 also imposes a two-thirds majority requirement on the state legislature for increasing taxes — either by  increasing rates or changing the way taxes are calculated.

These provisions have caused Senator Barbara Boxer, Nobel economist Paul Krugman, and a cadre of pundits to cry foul. The standard story is that these restrictions (a) force the state to rely more heavily on other taxes like personal income taxes because it can’t raise enough from property taxes, and (b) they prevent the legislature from raising taxes even in times of crisis. The actual tax data tell a different story.

First, the limits imposed on property taxes by Prop 13 no doubt delivered benefits to homeowners for more than three decades. That relief, however, was mitigated when housing prices began to eclipse income gains early this decade. The run-up in housing prices and the accordant increase in property tax assessments for those purchasing homes post-2000 meant huge revenue gains for government. Any Californian who purchased a home in the last decade knows full well the burden property taxes place on their personal finances. Indeed, according to the latest census data, California ranks 19th in terms of the aggregate level of disposable income required to pay property taxes.

Boxer, Krugman and company are fundamentally mistaken when they argue that the state relies less on property taxes because of Prop 13 compared to other states. Again, census data indicates that California ranks ninth-highest for its reliance on property taxes. Put differently, a full 41 states rely less on property taxes than California.

Specifically, local governments in California collect a little over one-third (34.3 percent) of their revenues from property taxes. Alabama, which ranks first, collects 44.4 percent of its revenues from property taxes. Contrast this reliance to some of California’s neighbors: Arizona 36.4 percent, Nevada 34.8 percent, and Utah 38.8 percent. This refutes the notion that California is a low property tax state and that Prop 13 has skewed the overall revenue mix in some bizarre manner.

At Malibu Real Estate Confidential, we’d love to hear from you – about real estate, freedom, citizenship and home ownership.  You can reach Peter Fleming directly at 310-454-1373 or email him at peterfleming@earthlink.net.  For all your home buying and selling needs shouldn’t you choose a real estate agent with a seasoned attitude and a commitment to home ownership?