We Need To Talk About California

San Francisco has the most expensive housing market in America…and it’s only getting worse.

We need to talk about California.

How is it that we have the 5th largest economy in the world, but land at 41st in the country in per pupil education spending?  How can we have 1 in 5 children living in poverty alongside 9 of America’s 10 wealthiest cities?

One big reason is Prop 13 – and it’s time we start talking about it.

Proposition 13 was a California ballot initiative, approved by voters forty years ago, that limited property taxes to 1% of assessed valuation, barred reassessments except when a property was sold, and capped increases at 2% a year, effectively gutting funding for schools, housing, roads, public safety and health services.

The measure was championed by lobbyist Howard Jarvis, a famous anti-tax crusader and ideological ancestor to Grover Norquist, who later became the namesake of right-wing political group “The Howard Jarvis Taxpayers Association”, who have fiercely lobbied to maintain Prop 13’s corporate property tax loophole for 40 years since it passed.

Despite initial warnings of serious deficit and unemployment issues – among others – by economists at UCLA, the ballot measure passed with 65% of the vote, immediately cutting state and local revenue by nearly 50%. According to the Howard Jarvis Taxpayers Association, in total, California has lost over $535 billion in revenue since 1978 as a direct result of Prop 13. As a direct result of this decrease in revenue, we have seen widespread disinvestment in poor communities of important services, infrastructure and development that have led to blight.  

In order to make up for this deficit, state and local officials have had to scramble to find new revenue sources, becoming overwhelmingly dependent on income tax while passing regressive taxes to close the gap. These moves disproportionately affect middle and lower-income communities while at the same time providing huge benefits to wealthy investors, landowners, and large corporations.

Not surprisingly, those who have gained the most from Prop 13 have been multinational corporate entities and the ultra-rich, with one wealthy elite group standing out as perhaps the single biggest beneficiary of the measure: Exclusive Country Clubs in Los Angeles County.

On a 2017 episode of his popular podcast “Revisionist History”, Author Malcolm Gladwell takes a look at how country clubs have uniquely benefited due to both Prop 13 and a little-known amendment to the California Constitution which allows them a permanent exemption from the “Highest and Best Use” standard for property taxes.

“Highest and Best Use” is a widely-used formula that taxes land based on the best use for it, regardless of what its actual use happens to be. For example, the Los Angeles Country Club, situated on 295 acres on Los Angeles’ Westside, has a land value of between $6-9 billion. Normally, in one of the most congested and expensive areas of the country – median home prices in the area exceed $1.5 Million – the standard for the land would be housing and taxed as such, generating around $60-90 million in property taxes annually.

However, due to the aforementioned amendment, the Los Angeles Country Club only pays $360,000. And because of Prop 13, that isn’t likely to change soon.

Because of Prop 13’s clause that bars reassessment until sale of property, the Los Angeles Country Club is still assessed at it’s 1975 property values, which today average $1.18 per square foot. Simply removing the commercial property tax loophole for this single country club would generate an additional $2 million in tax revenue, benefiting education, housing, and health clinics locally.

This is just the tip of the iceberg. There are over 50 corporate-owned golf courses and country clubs in LA County – when you add these into the equation, communities around Los Angeles lose millions every year in tax revenue.

Thanks to Prop 13, the general public is bankrolling exclusive, wealthy, members-only private clubs who collectively sit on enough land to build more than 4,100 football fields in Los Angeles County alone, clubs at which the vast majority of residents will never be allowed to enter, let alone enjoy.

However, there is hope on the horizon.

A growing movement of community organizations across the state, called “Schools and Communities First”, has already collected more than 599,000 signatures to qualify a ballot measure for the 2020 General Election which would eliminate the corporate loophole on property taxes, while guaranteeing existing protections for residential property and agricultural land.

If successful, the measure would raise over $11 billion per year for education and local services by ensuring that big corporations, including private, exclusive country clubs, pay their fair share.

California is a powerful economic machine. It’s time we make sure that machine works for everyone. 

Veronica Carrizales is the Legislative Director for California Calls, an alliance of  31 grassroots, community-based organizations across the state working to engage, educate and motivate new and infrequent voters among young people, communities of color, and poor and working class neighborhoods to make California’s electorate reflect the state’s diverse population.

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