Throughout the 1960’s, several assessors scandals led to the California legislature to enact reform bill (AB 80) in 1966.to keep assessments at a uniform percentage of market value. In 1971 and ’76, the California state supreme court ruled on Serrano v. Priest, and declared California's property-tax-based school finance system unconstitutional. The legislature came up with bill (AB 65)(1977), which was designed to equalize school revenues by increasing state funds for poor communities. Many Tax paying Voters did not agree with the courts ruling because the higher property taxes would not go to local schools. during the 1970’s, real estate values escalated rapidly along with home assessments. Because of reform bill (AB 80), this resulted in large increases in assessed value for many taxpayers.
Multivariate analysis revealed statistically significant increases in index before and after 1978
Shows how volitile sales tax revenue is
Compare and contrast people being taxed and their property.
The Fair Property Assessment Plan
Proposal for the amendment of Proposition 13: The Fair Property Assessment Plan Daniel Villanueva Omar Ventura
Presentation Outline <ul><ul><li>Brief summary of the Genesis of proposition 13. </li></ul></ul><ul><ul><li>Proposition 13 and its supporters. </li></ul></ul><ul><ul><li>The proposition itself. </li></ul></ul><ul><ul><li>The Aftermath of proposition 13. </li></ul></ul><ul><ul><li>Previous efforts to revise proposition 13. </li></ul></ul><ul><ul><li>Recent efforts to revise proposition 13. </li></ul></ul><ul><li>Our Plan: </li></ul><ul><ul><li>Steps toward implementation. </li></ul></ul><ul><ul><li>How to get involved. </li></ul></ul>
The Genesis of Prop 13 <ul><li>In 1965, a tax assessors scandal led to the passage of AB 80 in 1966, which standardized property taxes at 25% percent of the market value. </li></ul><ul><ul><li>This actually decreased Corporate property taxes that were initially around 50%, and increased homeowner taxes that were previously at 10%. </li></ul></ul><ul><li>In 1971, the California Supreme Court ruled on the case of Serrano v. Priest, which found the California school funding system to be unconstitutional. </li></ul><ul><ul><li>This sparked resentment among the many homeowners who did not want to see their tax dollars go to schools outside of their district. Despite the ruling, California continues to fail at keeping the per pupil spending gap between schools under $100. </li></ul></ul><ul><li>In 1977,due to AB 80 and an increasing property demand, homeowner property taxes were increasing by 50-100% in that year alone. </li></ul><ul><ul><li>Californians felt that the previous political actions reflected the incompetence of the state government, and strongly supported proposition 13, which was touted as a peoples initiative, that capped property taxes at a 2% increase per year, and required a 2/3 majority for any tax increase imposed by the legislature or senate. </li></ul></ul><ul><ul><li>This was considered a victory by populist voters who saw themselves as revolutionaries against rising taxes and big-government. </li></ul></ul>
Howard Jarvis <ul><li>In 1978, Howard Jarvis was a 75-year old owner of a small newspaper company turned manufacturing. While initially marginal, he eventually became the rallying image as a seasoned battler against higher taxes for the tax revolt in California to manifest </li></ul><ul><li>Jarvis pushed his initiative for a property-tax reduction four times, and failed. To gain more signatures each time, Jarvis endorsed both of Regan’s campaign’s for Governor, and campaigned for Regan’s proposition 1 as well. </li></ul><ul><li>Jarvis witnessed an Elderly woman die of a heart attack because she discovered that she might not be able to pay her property taxes. This gave Jarvis the perfect public image, as he said in the wake of the woman’s death: “Death and taxes may be inevitable, but being taxed to death is not inevitable!” </li></ul><ul><li>Jarvis also aided in the passing of proposition 62 to ensure that proposition 13 would never be repealed. </li></ul><ul><li>Howard Jarvis died in 1986. </li></ul>
Statistical Analyses Graph 1.1. This Graph reveals a growing disparity between the tax burden placed on Californians through sales and use taxes, and personal income taxes; and that placed on corporate income taxes over the past 30 years.
Statistical Analyses Graph 1.2. This graph reflects the ratio between personal income tax and corporate tax to adjust for inflation over time. The line of regression reveals that the disparity between personal income tax and corporate tax shares an overall positive correlation.
Statistical Analyses Graph 1.3. This graph illustrates the ratio between sales tax and corporate tax to adjust for inflation over time. While erratic, sales tax revenues tend to be more volatile than personal income tax revenues. The regression line reveals an overall positive relationship of the index, indicating a disproportionately increasing burden on sales tax in comparison to corporate tax.
Tables <ul><li>Correlation between personal income tax and corporate income tax. </li></ul><ul><li>Table 1.1. This Pearsons correlation analysis </li></ul><ul><li>reveals that there is a significant correlation </li></ul><ul><li> between personal income tax and corporate </li></ul><ul><li>income tax. </li></ul><ul><li> Correlation between sales tax and corporate income tax </li></ul><ul><li>Table 1.2. This Pearsons correlation analysis </li></ul><ul><li>reveals a significant correlation between sales </li></ul><ul><li>tax and corporate tax revenues. </li></ul>
Tables <ul><li>Table 1.3. This ANOVA from a regression analysis reveals that both personal income tax and sales tax vary significantly from corporate tax. </li></ul><ul><li>Table 1.4. This one-way ANOVA analysis reveals that both indices vary significantly over time. </li></ul>Table 1.5. The post hoc test reveals that while there is significant difference between indices over time, there is no significant difference in the indices immediately before and after 1978. Conclusions: The Pearsons correlation and regression analyses reveal that there is a statistically significant relationship between sales tax and corporate tax; and income tax and corporate tax in California. While the one-way ANOVA and the residual post hoc tests did not reveal a significant change in indices immediately before and after proposition 13, there was a significant change in the indices over time. This may be due to insufficient data for the years prior; as well as the possibility that the changes that occurred due to proposition 13 took longer to manifest than the number of given years per group. Since property tax is categorized under personal income tax, the significant difference between the before proposition 13 years and the 1987-1994 bracket for personal income tax reflects the gradual increase of the property tax burden on new businesses and homeowners.
Aftermath of Prop 13: <ul><li>Dramatic reduction in the amount of local property tax revenue available for cities, counties, and schools. Deficit remedied with vast increases to income and sales tax. </li></ul><ul><li>Changed the governance structure of California's education system by centralizing decision making from a local system of local schools, to a state system. </li></ul><ul><li>Properties that were very high in property value, properties exclusively controlled by corporate entities, benefited significantly over the years because those properties rarely changed hands. </li></ul><ul><li>Properties of equal size and worth but purchased or inherited at different times, are taxed differently, placing the tax burden on new families and business’s. </li></ul><ul><li>Vague wording in the section regarding how the school money was spent resulted in a overall non-compliance of that section of the proposition. </li></ul>
Aftermath of Prop 13: <ul><li>In 1988, proposition 98 was passed in hopes to ensure school funding was provided for k-12 education. However, this only prevented school spending from increasing. </li></ul><ul><li>In 2000, proposition 39 was passed, to make it easier for schools to pass bonds for improvements. </li></ul>
What Can be Done? <ul><li>In short, the Fair Property Assessment Plan defines “commercial”, “residential”, and “undeveloped” property; taxing and assessing each group differently. </li></ul><ul><li>“ Commercial” property is to be assessed at “full cash value.” </li></ul><ul><li>There is no change to how “residential” properties are taxed or assessed. </li></ul><ul><li>“ Undeveloped” land is to be exempt from taxation, to promote the usage of land that is already developed. </li></ul><ul><li>This is called a split-roll tax system, which delineates between residential and commercial properties. This protects homeowners, while closing corporate tax loopholes. Estimates conducted by the State Legislature found that a split-roll would generate about $7.5 billion for California per year. </li></ul>The Fair Property Assessment Plan
Method <ul><li>The Ballot Initiative Process </li></ul><ul><li>A proponent drafts a statute or a proposed amendment to the California constitution and submits it to the Secretary of State along with a fee of $200. It is then submitted to the Attorney General for the purpose of providing a title and summary of the proposed initiative. The Office of the Legislative Analyst and the Department of Finance are asked for a fiscal analysis to provide an estimate of the fiscal effect of the measure for the summary. The Attorney General is not authorized to make any changes to the proposal. The Secretary of State then approves it for circulation. The proponent has 150 days to gather signatures of registered voters in the state. The number of signatures required varies according to the kind of initiative and the number of votes cast for all candidates for governor in the last gubernatorial election. </li></ul><ul><li>The signatures are submitted to county elections officials for a determination of the validity of the signatures. If the Secretary of State determines that there are sufficient valid signatures, the measure will be placed on the ballot for the next general election that is held no longer than 131 days after it qualifies or for a special election held before that general election. </li></ul>
Method <ul><li>Californians believe that initiatives (39%) should have more influence than the legislature (32%) or governor (18%) over state policy. </li></ul><ul><li>The following cross tabulation shows that Regardless of Partisanship Ca voters prefer having themselves make decisions about long-term budget and governmental reforms over the legislature and governor by a margin of more than 45 percentage points. </li></ul><ul><li>Additionally, Regardless of Partisanship and Region, Ca voters favor the initiative process to make public policy over the governor and legislature by more than 15 percent. </li></ul>
Method Even though many voters believe that special interests have a lot (56%) or some (36%) control over the initiative process, 74 percent of adults and 79 percent of likely California voters believe that initiatives are important because they address significant public policy issues that the governor and state legislatures have failed to adequately address. PPIC STATEWIDE SURVEY: SPECIAL SURVEY ON CALIFORNIANS AND THE INITIATIVE PROCESS (SEPTEMBER 12-19, 2005) 2,004 CALIFORNIA ADULT RESIDENTS: ENGLISH AND SPANISH (Margin of Error +/-2% at 95% confidence level for total sample)
What can be done? <ul><li>Education </li></ul><ul><ul><li>59% of Californians feel that proposition 13 has been mostly beneficial, while 12% do not know about it. </li></ul></ul><ul><li>Coalition Building </li></ul><ul><ul><li>Connect all, K-12, CC, CSU, and UC Students, Staff, Faculty, Administration, Unions, Student Government, and Student Organizations across California in Educating. </li></ul></ul><ul><ul><li>Join the Californians for the Fair Property Assessment Plan and/or Phil Ting’s “Close the Loophole” campaign to learn about and organize upcoming events. </li></ul></ul>
Current Efforts to Revise Proposition 13 <ul><li>California Tax Reform Association </li></ul><ul><li>WWW.AMENDPROP13.COM </li></ul><ul><li>WWW.CLOSETHELOOPHOLE.COM </li></ul><ul><li>Facebook Group: </li></ul><ul><li>Californians for the Fair Property Assessment Plan </li></ul>