California's High Home Prices in the 1970's

California home prices achieved separation
from the rest of the U.S. in the 1970's (psmag)

One aspect of Jimmy Carter's Presidency of which I was unaware:

Carter’s presidency was No. 1 for California home-price gains

During Carter’s four years in the Oval Office, California home prices jumped 90%, as measured by the Federal Housing Finance Agency. No presidential term since Carter’s has produced a larger California home-price surge.

High housing prices are not unequivocally good; they benefit sellers but hurt buyers, and with sizable numbers on both sides politicians should try to cater to both (e.g., lower taxes on capital gains, faster permitting).

In California during Jimmy Carter's term, the State government was a huge beneficiary of the runup in home prices. Property taxes were ad valorem, i.e. based on the market value of homes, and had increased dramatically. There were numerous widely accepted anecdotes (though extrapolation would be unreliable because sellers did not have to disclose their motivation) of fixed-income seniors who were forced to sell their homes due to property tax increases. State legislators made no move either to lower taxes or rebate surpluses. The stage was set for Proposition 13.

From the State Board of Equalization's 2018 California Property Tax - An Overview:

On June 6, 1978, California voters overwhelmingly approved Proposition 13, a property tax limitation initiative. This amendment to California’s Constitution was the taxpayers’ collective response to dramatic increases in property taxes and a growing state revenue surplus of nearly $5 billion. Proposition 13 rolled back most local real property, or real estate, assessments to 1975 market value levels, limited the property tax rate to 1 percent plus the rate necessary to fund local voter-approved bonded indebtedness, and limited future property tax increases.

The home-price increases during the term of President Carter are an interesting phenomenon but are historically important because they spawned a nationwide taxpayer revolt that still echoes in the politics of today.

To Make Our Displeasure Known

Last year the EDD lost $20-$33 billion because of fraud.

On specific categories (income, property, sales, gas) California may not be the highest-taxed state, but there's no question that in the state rankings of the overall tax burden California is #1 or #2.

The pain would be lessened if the monies were employed somewhat effectively, but California continues to spend $billions on homelessness, high-speed trains to nowhere, and public education, with no signs of progress. And we've not even mentioned the $billions lost to fraud.

We've lamented the situation for years, but the voters keep re-electing the same people, and the one-party state rolls on, more dominant than ever in its taxing and spending and wastefulness.

However, once in a blue moon the political process still has the capacity to surprise (pleasantly).

Headline: These California taxes could be overturned by ballot measure before state Supreme Court [bold added]

The initiative, a proposed state constitutional amendment, would require any increase in state or local taxes or fees to be approved by the voters — and by two-thirds of the voters if the funds are for a specific purpose, like housing or zoo maintenance, rather than general government revenue.

Perhaps the most far-reaching feature of the measure is that it would apply retroactively to taxes and fees passed since the start of 2022. They would be rescinded unless voters gave approval by the required majority no later than a year after the initiative took effect.

Overall, state officials say the retroactivity standard would affect 15 bills signed by Gov. Gavin Newsom that could affect statewide fees or taxes, and at least 131 such measures passed by local governments since the start of 2022.

This initiative received enough signatures to qualify for the November ballot, but, not unexpectedly, Governor Newsom and Democratic legislators have filed "emergency" lawsuits with the State Supreme Court to have it removed.

The initiative threatens to halt the endless cycle of tax and spend, and strikes at the heart of the one-party State. Your humble blogger doesn't give the initiative much of a chance of surmounting the obstacles in front of it, but at least those of us who are fed up with the way things are finally have a chance to make our displeasure known.

Election Day

All this just for me

Avoiding the rush, I voted on Monday, in person, at the Community Center. At noon there was no line. Otherwise, it felt like cramming for an exam.

It took two hours to review the stack of election materials and fill out the cheat sheet. The Presidential race and a few State Propositions--22 (independent contractors), 15 (property tax modification), and 16 (affirmative action)--have garnered all the publicity, but there were nine other propositions to study, school boards and harbor district boards to elect, and bond measures to consider.

I continue to follow my two general rules posted in 2010 for voting on candidates and propositions:

1) I don’t vote for lawyers. Some of my best friends are lawyers, and they’re some of the smartest and most honest (really!) people I know, but lawyers are vastly over-represented in government. The legal mentality---I know I’m exaggerating—believes that a desirable outcome can be obtained by passing the right law or by crafting a regulation with just the right words. That’s not how the world works; the right words don’t clean up oil spills or dissuade people from crossing the border illegally or produce quality cars and emergency rooms.

2) I don’t vote for propositions. Somehow I’ve managed to live over half a century without the [five] state ballot initiatives that have been proposed this year. New laws usually add to the burden, not the joy, of living. Unless there is a severe problem that our elected representatives have decided not to address--such as the State’s overflowing treasury from a 1970’s real-estate boom that produced the property-tax limits of Proposition 13—I automatically vote against propositions. (One cheerful exception would be a law that retires or replaces two or more others; wake me when that happens.)

Update: I've had to modify rule #2 above. Now that California is a one-Party State, that is, it's run by a Governor and filubuster-proof Legislature of the same political party, there's been a lot of mischief concocted since 2010, so I will vote for Propositions that overturn some of that mischief.

Happy Election Day, everyone! © 2020 Stephen Yuen

California Education, Where Governor Newsom is the Sane One

(Fox News photo)

In the mid-20th century California's public education system was the nation's envy.

The decline began in 1978---according to the politicians that run the State, the education industry, and the media---with the passage of Proposition 13. That measure limited all property tax increases, and Proposition 15, on the ballot this November, removes Prop 13's protections against tax hikes on business property. As they wait for Prop 15's potential windfall, politicians haven't sat still in their efforts to fix education.

AB 331, passed by super-majorities (33-4 in the Senate and 62-12 in the Assembly) in the Legislature, would require "ethnic studies" that teach

students “the four ‘I’s of oppression” and academic concepts like “intersectionality,” “internalized oppression” and “transformative resistance.” Instead of a dynamic, imperfect, pluralistic republic with common ideals, students would be taught to see their country as an organized conspiracy against victim groups.

The University of California no longer requires taking the SAT or ACT to gain admission, purportedly because of the tests' discrimination against disadvantaged minorities. The educational philosophy that gave rise to AB 331 shows that there may be reasons other than discrimination and the lack of money that the kids aren't performing well on standardized tests of English and math.

In a rare moment of sanity in the one-Party State, Governor Newsom vetoed the bill. Perhaps it was because of stuff like "an assignment on Jewish and Irish Americans 'gaining racial privilege.'"

Gavin Newsom has been displaying unusual behavior, like cooperating with President Trump on wildfire management, tabling the high-speed rail project, and not granting his Party everything it wants. In this strangest of political years the Governor has nothing to fear from the toothless Republicans, and he would do well to watch his left flank over his right.

How You Get Another Proposition 13

Using math to persuade--good luck with that. (Chron photo)

In December we noted how residents of high-tax states were early-paying their 2017 state income and property taxes because their Federal deduction would be limited in 2018. (The Milton, MA treasurer said, "Thank you, Mr. Trump, for solving my cash flow issues.")

Your humble blogger joined the check-writing spree by making payments to the State of California and San Mateo County one to four months before they were due. It's not hard to imagine that I was joined by millions of Californians who itemize their deductions and engage in a modicum of personal financial planning.

Five months later, the State of California has collected $8.8 billion in "unexpected" tax revenue. The surplus has been attributed to "boom times" and not to voluntarily accelerated payments prompted by the new tax law (heaven forfend that President Trump or the Republicans were responsible). We will soon have a better understanding of the reasons if tax collections rise or fall in a strong 2018 economy.

Governor Brown (to his credit, IMHO) wants to set aside most of the $8.8 billion for a rainy day fund:

“We’re nearing the longest recovery in modern history, and as Isaac Newton observed: What goes up must come down,” Brown said. “This is a time to save for our future, not to make pricey promises we can’t keep. I said it before and I’ll say it again: Let’s not blow it now.”

The surplus will be fiercely fought over in the Legislature during the next month of budget negotiations for the fiscal year that starts July 1. Brown is proposing to stash $7.6 billion, with $3.2 billion going toward the state’s budget reserve for unexpected expenses like wildfires and floods, and $4.4 billion into a rainy-day fund that would be used during a recession.

Various interest groups, of course, are holding their hands out for "badly needed" housing, education and health care. The tax windfall parallels the 1970's, when the real-estate boom caused tax revenues to soar (property taxes were based on the market value of homes). Despite the pauperization of seniors living on a fixed income, the government refused to adjust the calculation or refund the excess. The consequence was the crude, flawed, effective Proposition 13 which severely limited increases in property taxes.

Sacramento is riding high now, and the single-Party state seems impregnable, but the grasping behavior 40 years after it was enacted is how you get another Proposition 13.