Lets go back to 1978. California passed an initiative known as Prop. 13. It was officially called People’s Initiative to Limit Property Taxation. Wikipedia says that a positive affect was to save the California taxpaying citizen $528 billion dollars. Positive? Let’s look at that. Yes, it saved somebody $528 billion in taxes. To put it another way, it deprived the county governments of California of $528 billion dollars in revenue.
Funny how these tax cuts are always couched in “the People’s this” or “the People’s that.” Who are these “people” who gained from Prop 13, really? Prop 13 froze the evaluation of a property at the purchase price with a possible 2% annual assessment increase. So, who holds on to property? Commercial property owners hold on to property. Thus the most expensive property pays the smallest tax bill while the little guy who trades up or buys a house for the first time is paying the new, higher rate…
“As an example, the Times has reported that the property tax bill of the historic Capitol Records building in Hollywood is approximately five cents per square foot, while a small house assessed at $300,000 may pay up to 60 times that on a per-square-foot basis.”
Does this sound familiar? Yes, the rich get the breaks and the middle and lower class get broken. To make up for this $528 billion loss of revenue, local government tried to raise taxes through special assessments and raising the sales tax from 6%, before Prop. 13, to over 8% today. That kind of worked, but again, these taxes hit the poor and middle class the hardest. The only problem is that for sales taxes to generate income, someone has to buy stuff. Today, after years of abuse of the middle and lower class and finally the Bush tax cuts for the rich, no one, but the very rich, has any money to buy stuff. Local, county, and state governments that depend on property tax, sales tax, and now income tax are running out of funds.
Don’t take my word for it. In Bob Herbert’s column today, his discussion is timely…
“…analysts who have tracked the increasing share of national income that has gone to the top 1 percent of earners since the 1970s, when their share was 8 percent to 9 percent. In the 1980s, it rose to 10 percent to 14 percent. In the late-’90s, it was 15 percent to 19 percent. In 2005, it passed 21 percent. By 2007, the last year for which complete data are available, the richest 1 percent were taking more than 23 percent of all income.
The richest one-tenth of 1 percent, representing just 13,000 households, took in more than 11 percent of total income in 2007.
That does not leave enough spending power with the rest of the population to sustain a flourishing economy.”
So, here we are today. A pipeline in San Bruno explodes and we find out what happens when key fire stations are closed for lack of funds. The problem is not that Government is trying to do too much. The problem is that the upper-class, while reaping the most benefits from our government are not paying their share.
“With so much of the middle class and the rest of working America tapped out, there is not enough consumer demand for the goods and services that the U.S. economy is capable of producing. Without that demand, there are precious few prospects for a robust recovery.
If matters stay the same, with working people perpetually struggling in an environment of ever-increasing economic insecurity and inequality, the very stability of the society will be undermined.
The U.S. economy needs to be rebalanced so that the benefits are shared more widely, more equitably. There are many ways to do this, but what is most important right now is to recognize this central fact, to focus on it and to begin seriously considering the most constructive options. “
And thank you Mr. Herbert for such a timely back up and helping me to put the blame where it belongs.