Villaraigosa: Overhaul Prop 13

Los Angeles Mayor Antonio Villaraigosa put himself in the line of voters’ fire, this week when he called for an overhaul of California’s Proposition 13. The controversial 1978 ballot initiative reduced property taxes to one percent of the value of the property at the time of acquisition until the next sale.

Critics have long decried passage of Prop 13, saying it has starved California’s revenue stream, arguing that most citizens aren’t cognizant of how the so-called savings from Prop 13, about $500 billion, end up as significant burdens on numerous public services, which have to make due without that money.

Supporters say that California’s property taxes are among the lowest in the nation, a big plus given the state’s other high tax rates.

Villaraigosa’s proposed change to the proposition don’t involve homeowners, but rather call for lifting the tax cap on businesses that have paid the same tax rate for more than 25 years, assuming they’re in the same location. Disneyland, for example, is the happiest place on Earth in part because its property taxes reportedly haven’t changed since 1978.

Meanwhile, in Sacramento, Governor Jerry Brown on Wednesday essentially turned down a challenge from Villaraigosa to reform Prop 13. “I’m not planning to join (Mayor Villaraigosa), but I certainly welcome the debate,” Brown said. Political analysts suggest that Prop 13 constitutes California’s equivalent of a “third rail” issue, and is seen as untouchable by many politicians in the state because it is so popular with the electorate.

The Mayor dangled a big financial carrot in front of Brown: lifting the Prop 13 cap for businesses could generate between $2.1 billion and $8 billion annually.

Anti-tax advocates and business groups were quick to call Villaraigosa’s Prop 13 reform idea an attack on small businesses.

The measure can only be changed by a two-thirds vote of the state legislature or through a ballot initiative. –Add’l sources: LA Times, Silicon Valley Mercury News, NBC