Friday, April 6, 2007

Prop 13 Limit on Property Taxes Under Review in the Legislature

The OC Register has this editorial on assembly bill ACA8, brought by new Democrat Assemblyman Jared Huffman of San Rafael. Prop 13 was passed in 1978 to limit property tax increases. When taxes are based on the property value and that value increases, so do your taxes. Prop 13 "freezes" your tax rate at the purchase price of your property, and can only rise by 2% a year. (Incidentally, this creates an incentive for cities to take your property via eminent domain, so that it can resell it, capitalizing on the increased taxes, assessed against the current value instead of the old value. See my paper, Who Will Redevelop Redevelopment? Power and Pragmatism in California Redevelopment Law, at SSRN, soon to be published in the Albany Environmental Outlook Journal.)

The new bill, if passed, would allow this 2% tax increase cap to be changed by a 55% vote rather than the 2/3 vote under Prop 13.

The OC Register is known for is libertarian stance. Thus this bill is bad simply by virtue that it would give more tax dollars to the government. It is the view of absolute skepticism about governmental power. Consider this quote from the article:

Unlimited taxing power is destructive. It follows therefore that the more
limited the taxing power, the less damage it can do.

This argument is clearly flawed. Just because too much of something is bad doesn't mean that eliminating it is the answer. Drinking a gallon of milk at one sitting is bad. But that doesn't mean I ought to cut out milk from my diet altogether.

Don't get me wrong. I am no fan of taxes or big government. But I would caution against committing the fallacy of condemning any tax bill simply by virtue of the fact that too much tax is a bad thing. Every tax should be judged on its own merits. The OC Register doesn't bother going that far here.

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