4-opt-1-a, Working paper, Prop 13 and the fall of Cal

4-opt-1-a, Working paper, Prop 13 and the fall of Cal -...

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EXCERPT FROM: "Property Tax Reform in the Big Picture" Mason Gaffney Paper Delivered at the Conference on Land, Wealth, and Poverty The Jerome Levy Institute, November 3, 1995 What happens when a state radically slashes its property tax? Michiganders are saying they must wait and see, but there is no need for that: California can show you 17 years of experience. To read your future, just study our past. Here is what has happened since California passed Proposition 13 in 1978. The obvious direct results have been to cut public services, raise other taxes, and lose credit rating. Our school support fell from #5, nationally, to #40 in 1985 when last seen, still falling. County road maintenance is down to where my county (Riverside) is repaving its roads at an annual rate of once every 130 years. Once in 20 years is recommended here, and up north you generally need higher frequency. You can't just build infrastructure and then stop paying for it, it's a perpetual commitment. Thanks to urban sprawl, a high fraction of our population now depends on these county roads. In 1978 we had a surplus in Sacramento. Since then we have raised business taxes, income taxes, sales taxes and gas taxes, but go broke every June. Now our State bond rating is last among the states. One of our richest counties (Orange) has gone bankrupt; Los Angeles is on the brink of it, saving itself by closing emergency rooms and hospitals that serve as a last resort for the uninsured poor. The private sector is doing badly, too. Raising income taxes, business taxes, and sales taxes is no way to stimulate an economy; they are all a drag on work and enterprise. Our income pc was down from #7 to #12 among the states by 1992, then fell some more. From 1992-94, California was one of three states where median household income fell. Our unemployment rate is 9%, 50% higher than the national mean of 6%. Our poverty rate is 18%, compared to 14.5% nationally. Not surprisingly, therefore, the only government function that grows now is building and operating prisons. One of our few rebounding industries is cinema, the art of escaping from reality: we excel at that. Another thriving activity is that of auctioning off used machinery for export to the east. In 1993 there was net outmigration (including international migration) from this state that has symbolized American growth since time immemorial. It is unheard of. 426,000 people were
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lost, nearly 2% of the population. This is a watershed change: imagine of all states California, America's trend-setter, our El Dorado, The Golden State, our Horn of Plenty, the safety-valve for job-seekers and retirees and entrepreneurs from everywhere, the end of the rainbow, losing population! It's almost enough to make
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This note was uploaded on 02/16/2012 for the course ECON 123 taught by Professor Smith during the Winter '11 term at UC Riverside.

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4-opt-1-a, Working paper, Prop 13 and the fall of Cal -...

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