Saturday, January 30, 2010

Don't Blame Proposition Thirteen

California is once again facing a budgetary shortfall, after the politicians managed to come up with a "fix" that balanced the state budget for a few more months. This has happened several times over the past year, and each time there is a predictable chorus of people blaming Proposition Thirteen for the inability of politicians to not spend more than is collected in taxes.

The first argument is that Proposition Thirteen makes it impossible to raise taxes. Given that in February of 2009 the largest state tax increase in the history of the United States was passed, that is truly an absurd argument to make. If Proposition Thirteen really did make it impossible, instead of merely more difficult, to raise taxes, the tax increase of 2009 would never have happened.

The other argument is that Proposition Thirteen somehow leads to minority rule. The problem with that argument should be obvious to everyone - two thirds is not a minority. If two thirds of politicians vote for something, a majority has voted for that something.

A more sophisticated version of that false argument is that the majority, in order to pass anything, the majority must convince part of the minority to vote with the majority, and this in a very weak way this results in minority rule. But in truth this once again is still majority rule, and if the minority under persuasion demands something the majority is unwilling to give that minority cannot pass anything - it is a minority.

The real reason there is a budget crisis is because those in government are unwilling to control their spending. The situation in California is identical to a person who continuously lives beyond his means and then blames his employer for not giving him enough money once the credit card bill is due. If an individual makes that argument, the absurdity of the claim is readily apparent.

But when a government official makes that claim, for some reason people actually take it seriously. Assemblywoman Noreen Evans made exactly that claim: "There is this mantra out there 'living within our means' and while it sound really nice it sounds really simple and it sound really responsible it's meaningless. Our means are completely within our control". It's not her fault that she approves spending far beyond what tax revenues will allow, it's the tax payers for not writing her a blank check.

She blames Proposition Thirteen for the lack of a blank check. The real reason there is no blank check is because they don't exist.

3 comments:

Dan said...

If Prop 13 didn't cause the budget crisis directly, it certainly caused the most extreme housing bubble in the nation. Within 18 months of Prop 13's passage, foreign interests acquired more California land than they had amassed in the state's history.

At the time of Prop 13's passage, California's housing affordability index (median house price over median household income) was only 10% higher than the national average. Today it is 3-4 times the national average, and 23 of the 25 least affordable cities are in California.

There is a direct correlation between property tax rates and housing price stability. Four of the six most affordable cities are in Texas, which still relies mostly on property tax.

1n 2005, just before the bubble burst, The least affordable city in Texas (Austin), had an affordability index of 3.91, well below that of the most affordable city in California (Bakersfield), which had an index of 5.82. San Antonio's index is 2.23, compared to San Francisco's 12.64. Thanks to Prop 13, you leave a lot more than your heart in San Francisco.

It should therefore come as no surprise that California leads the nation in foreclosures. What Prop 13 saved home owners in taxes was more than offset in higher payments to the land speculators and banks that invaded the newly tax-sheltered real estate market.

The problem with Prop 13 is that it did not curtail spending as promised. It merely shifted the tax burden off of real estate where it belonged, and shifted the taxing power from the municipal level to the state level.

A more honest reform would have let the people of each taxing jurisdiction control both the taxing and the spending of that jurisdiction. If Jarvis had been a real reformer instead of a shill for real estate interests, that's what he would have proposed.

Roy said...

Ayn, as soon as I saw the title of this article, I knew FOR CERTAIN that you were going to be lying. The syllogism is very simple:

1. All supporters of Proposition 13 are apologists for privilege and injustice.

2. All apologists for privilege and injustice lie.

3. You are a supporter of Proposition 13.

4. Therefore, you lie.

I will now identify and refute your lies:

"The first argument is that Proposition Thirteen makes it impossible to raise taxes."

That is a lie. No one has ever claimed that Prop 13 makes it impossible to raise taxes. Anyone who understands the issue knows that Proposition 13 makes it impossible NOT to raise taxes.

Because all the benefit of government spending on services and infrastructure goes to landowners (a fact proved by the Henry George Theorem), government is effectively a mechanism for subsidizing idle landowners at the expense of the productive. The only mitigation of that subsidy is the land value portion of the property tax. When the effective tax rate on land value is relentlessly reduced, as by Prop 13, government becomes an engine of destruction, stealing more and more wealth from the productive to give to idle landowners in return for nothing. This process has, in various forms, destroyed many civilizations, just as it is destroying California. Until Prop 13 is repealed, every day in every way, California will continue to get worse and worse. Take it to the bank.

"The other argument is that Proposition Thirteen somehow leads to minority rule."

Again, that is a flat-out lie. There are many sound arguments against Proposition 13, and neither of the "arguments" you claim are "the" arguments is among them.

"The real reason there is a budget crisis is because those in government are unwilling to control their spending."

That is another flat-out lie. It doesn't matter who is in government or how willing they are to control spending. Prop 13 makes it ECONOMICALLY IMPOSSIBLE to maintain the services and infrastructure society requires in order to function without raising taxes on the productive. _IMPOSSIBLE_.

"The situation in California is identical to a person who continuously lives beyond his means and then blames his employer for not giving him enough money once the credit card bill is due."

That is another flat-out lie. Unlike the credit card holder, the CA legislators are not spending money for their own purposes. They are giving it to landowners. Because all the benefit of government spending on services and infrastructure goes to landowners, and none to the putative beneficiaries of the spending, Prop 13 FORCES CA legislators to GIVE the state's tax revenue to landowners, in return for nothing.

"If an individual makes that argument, the absurdity of the claim is readily apparent."

Right. You can get away with your claim, because its absurdity is subtle, and few people understand it.

"The real reason there is no blank check is because they don't exist."

Oh, but they do. Prop 13 is precisely a blank check written to CA landowners on the account of the productive. The increase in CA land value since Prop 13 passed in 1978 is precisely the amount of that blank check that has been cashed to date.

Ayn R. Key said...

Roy, with your "simple syllogism", your first premise is a lie, or in your terminology, a "flat out lie". That means your conclusion is faulty. There are plenty of people who support Proposition Thirteen without being "apologists for privilege and injustice" - otherwise a majority of the voters in this state would be said apologists.

As for the arguments you claim are lies, I really find it amusing when you tell me I haven't heard the argument I have heard. But somehow, in spite of your denial of reality, I did hear those arguments.

So are the people who made those arguments to me liars when they used those arguments to say that Proposition Thirteen is bad?

Were they lying to me when they tried to tell me how bad Proposition Thirteen is?

So, what is the line-item in the budget where the state gives money to the land owners? I would very much like you to quote the exact passage in the last several state budgets.

Otherwise the situation is exactly as I described - someone spending more than they earn, and blaming the boss for not paying them more.

Nice try, Roy, but screaming "liar" over an over doesn't substitute for a real argument.