Proposition 13 – It’s A Wonderful Life

David R. Doerr, Chief Tax Consultant for the California Taxpayers Association, recently published a lengthy commentary on Prop 13 in the Cal Tax Report. Doerr has served as CalTax’s chief tax consultant, analyzing tax policies and reporting on tax issues, since 1987. He previously served 24 years as chief consultant for the Assembly Revenue and Taxation Committee, and in that capacity chaired the task force that developed legislation to implement Proposition 13. Mr. Doerr is the author of "California’s Tax Machine: A History of Taxing and Spending in the Golden State," which is used as a reference work by the state’s policy makers, and has been called "the bible on California taxes."

Recently, foxandhoundsdaily.com published a summary of Doerr's article, in which he states that a split roll would mean a return to the unfair ad valorem tax system for locally assessed business real property, improvements and fixtures. Under an ad valorem assessment system, property is assessed on a subjective, not objective, basis. For most properties, there is no conclusive proof of what the value is on the lien date, as the three methods for determining value have flaws – and, at best, establish a range of values.

Like the message of the classic holiday film, "It’s a Wonderful Life," Doerr states that in order to measure the impact of Proposition 13, we need to see what California would be like today if it hadn’t been voted into existence. Proposition 13 was approved by voters more than 35 years ago. It cut the property tax more than 50 percent, and instituted an acquisition-value property tax assessment system that has produced California’s most stable revenue source, even during economic recessions.

If Proposition 13 hadn’t been approved, the previous dysfunctional ad valorem property tax system would still be in place. To understand Proposition 13, we need to understand the system it replaced, as well as Proposition 13’s accomplishments. And the first thing to consider is that the old ad valorem property tax produced few correct assessments, and forced a number of property owners – both businesses and homeowners – to give up their property because of their inability to pay unforeseen and out-of-control property taxes.