Wednesday, May 27, 2009

We Are Not Alone: California As Screwed As Arizona

Posted By on Wed, May 27, 2009 at 2:44 PM

A few days ago, New York Times columnist Paul Krugman made some of the same points about California that I make in this week's cover story, "You Screwed Up: How Voters Have Wrecked Arizona's Government." Krugman's take:

The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.

The result was a tax system that is both inequitable and unstable. It’s inequitable because older homeowners often pay far less property tax than their younger neighbors. It’s unstable because limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions.

Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.

At least we haven't frozen property values, although not for lack of trying on the part of many anti-tax reactionaries.