What’s The Matter With California?

The American Spectator takes a string of California municipal bankruptcies as proof of the dangers of the extravagance of the modern liberal welfare state.  Ben Domenech’s Transom — a subscription-only daily email blast offering a good window into the right’s talking points du jour, analogous to a paid, partisan version of Mike Allen’s daily must-read — echoes the same:

I’ll gladly pay you Tuesday doesn’t seem like such a good idea on Wednesday: how public worker pay and pensions doomed Stockton. “How does a bankrupt city pay its public safety workers twice the median household income of the area’s residents? More important, why haven’t the city manager and council stopped this wage bonanza? In Stockton, California, public safety workers earn on average 126 percent of the maximum salary and at least 200 percent of the minimum wage for their respective wage categories. The California State Controller’s Office has all the data, and it’s not pretty.

To be sure, if these details bear out, it’s not pretty. Why, it’s almost as irresponsible as cutting taxes while fighting two wars! But let’s step back and evaluate the whole picture. While part of the problem is that California maintains exorbitant municipal services, and fiscal policies designed to aggressively validate progressive goals like environmental protection, the flip-side of the problem is that they’ve never been willing to pay the price for either. Recall that in 1978, California enacted a radical tax rewrite termed Proposition 13, which arrested any growth in property taxes, conspicuously favoring current over future residents. As described by the Supreme Court, in sustaining the tax scheme:

As enacted by Proposition 13, Article XIIIA of the California Constitution caps real property taxes at 1% of a property’s “full cash value.”  “Full cash value” is defined as the assessed valuation as of the 1975-1976 tax year or, “thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.”The assessment “may reflect from year to year the inflationary rate not to exceed 2 percent for any given year.”

Nordlinger v. Hahn, 505 U.S. 1 (1992) (internal citations omitted). The fallout has been drastic, including widespread budget shortfalls, and other deleterious social effects, such as increased reliance on sales tax, and the zoning ills that practice invites. Per Time:

Proposition 13 was the brainchild of the late Howard Jarvis. The antitax crusader was a policy genius not unlike Franklin D. Roosevelt. Both shared an affinity for designing deep structural change that, once embedded in the political system, is nearly impossible to alter without a massive change of heart by voters. [….]

Jarvis created a similarly impregnable institution. When he rode the wave of anger over skyrocketing property-tax assessments to pass Proposition 13 in 1978, he included a two-thirds vote requirement for the passage of any new taxes in California — an insurmountable obstacle built on populist allergy to any kind of new levy. Beholden to a tax-averse electorate, the state’s liberals and moderates have attempted to live with Proposition 13 while continuing to provide the state services Californians expect — freeways, higher education, prisons, assistance to needy families and, very important, essential funding to local government and school districts that vanished after the antitax measure passed.

Now, however, that balancing act no longer seems possible.

Indeed. As is the case with the federal budget, blaming (and cutting) social services can only ever be part of the solution, as we continue trying to live within our national means. The other part of the solution, and what should probably compose the lion’s share of any plan, is ending our “populist allergy” to all kinds of taxation, especially as federal taxes continue to ride a thirty-year low. As California should reconsider Proposition 13, so should we reconsider the stranglehold Grover Norquist’s anti-tax pledge exerts over the GOP. Admittedly, that hold is loosening. But slowly, and belatedly.

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