For years Prop 13 has been blamed for California’s financial woes by our liberal friends. Their main point is that, given population growth and inflation, somehow the state has lost out over the years in bringing in revenues from property taxes. A correspondent pointed me to a recent piece by Chris Reed in the San Diego Union-Tribune’s blog that sets the ground work to show that state revenues have not suffered due to Prop 13. Reed got a ton of comments on this post that commend and condemn his conclusion. However, none of the commenters look at the data from the correct perspective. Had Reed done what I show below, the comment thread might have been more illuminating, especially from the left.
Here’s Reed’s data for the 1980 to 2007 time window which are not contended. Population rose from 24 to 38 million. Annual property taxes revenues rose from $6.36 to $43.16 billion. The Consumer Price Index that measures inflation rose from 88 to 202.4.
The important and revealing metric to assess the impact of Prop 13 is the inflation adjusted per capita revenues that the state has enjoyed over this period. Everyone knows that since Prop 13 the state has found many other areas and activities from which to squeeze tribute out of us during the last 27 years. So let’s see if the passage of Prop 13 has somehow caused collected property taxes to fall behind in contributing their share to the state’s coffers.
1980 per capita property tax was $6,360,000,000/24,000,000 = $265.00.
2007 per capita property tax was $43,160,000,000/38,000,000 = $1,135.80.
The CPI increase gave us a total inflation of 202.4/88 – 1 = 2.3 – 1 = 1.3 = 130%.
The inflation adjusted 2007 per capita property tax then becomes $1,135.80/2.3 = $493.82.
The inflation adjusted percent increase is then $493.82/$265.00 - 1 = 1.864 – 1 = 86.4% more than inflation increased during the 27 year interval.
Putting it another way, the state’s annual property tax revenues increased at a rate
(1.864)^(1/27) – 1 = 1.023 – 1 = 2.3% over that of inflation. And since the average annual inflation rate over that period was (2.3)^(1/27) – 1 = 1.031 – 1 = 3.1%, the state pulled in property tax revenues that grew at a 2.3%/3.1% = 74.2% higher rate than needed to keep pace with the 1980 per capita property tax receipts.
Short answer, Prop 13 has not kept the long hand of government from taking more money and buying power from us year after year over most of the last three decades. Now you know.