A really bad idea: Prop. 13 Arizona

Posted by AzBlueMeanie:

Oh dear God, when will this fool ever learn? Lynne Weaver, a California transplant who should know better, is again chairing a committee for an initiative dubbed "Prop. 13 Arizona." This is Weaver’s third bid to put the issue on the ballot. Prior efforts in 2008 and 2010 failed because she did not collect enough signatures. Howard Fischer reports Proposed initiative would limit property taxes in Arizona:

Armed with a new fundraising tactic, proponents launched a new drive Monday to cap what homeowners and others can be forced to pay in property taxes.

Dubbed Prop 13 Arizona, the ballot measure would roll back the assessed value of homes and businesses to what they were in 2003, before speculators helped spike prices. Those rising sales prices, in turn, boosted the tax assessments of everyone else in the neighborhood.

OK, let's pause right there. Ms. Weaver clearly knows little about real estate, or she would be aware that property values since the real estate bubble burst in 2006 have declined precipitously in Arizona, and have almost returned to pre-bubble valuations. Arizona has a substantial inventory of foreclosure and vacant homes. The real estate market has not yet hit bottom, as home values have continued to decline into 2011.

If Ms. Weaver would take the time to speak to county assessors she would learn that there is approximately a 2-3 year lag time for these reduced property values to be reflected in assessed valuations for purposes of property taxes. Those lower assessed values have already begun to be reflected in property tax bills (some Arizona counties have adjusted their tax rates to compensate for the loss of revenue due to the lower assessed values). This market-based system is adjusting to the market without imposing an idiotic gimmick like Prop. 13.

By the way, residential property taxes will be going up in the near future not because of rising home values (which will take many years to recover from the collapse) but because of the Arizona legislature. The so-called "jobs bill" (HB2001) included historic business property tax relief that, when fully implemented (going from 25 percent down to 18 percent Class 1 ratio in 2016), will mean a 28 percent reduction in the business property tax assessment ratio. This tax burden will be shifted to residential home owners to make up for lost revenue. If you want to get upset about something, let's start here.

For nearly two decades the Tax Foundation has published an estimate of the combined state-local tax burden shouldered by the residents of each of the 50 states. The Tax Foundation – State and Local Tax Burdens: All States, One Year, 1977 – 2009. Arizona's tax burden is low at 8.7%, ranking 38th out of the 50 states in 2009. That number has likely gone down since 2009.

A 1980 voter-approved constitutional provision already caps property taxes for homeowners at 1 percent of the home’s “full cash value.’’ Article 9, Section 18, Ariz. Const. There are numerous other tax exemptions and tax limitations imposed in Article 9 of the Arizona Constitution. This notion that people are being "taxed out of their home" is false. If someone is losing their home in Arizona, it is because they have lost their job and cannot make the mortgage payment.

Arizonans also adopted what was dubbed the "mini-Prop. 13" at the time, Prop. 105 in 1992, which requires a two-thirds super-majority vote in both chambers of the legislature to raise taxes, or to eliminate tax credits or exemptions. This has been the single most destructive act ever enacted into law in Arizona. It is the source of our structural revenue deficit today.

That two-thirds super-majority vote provision was in Howard Jarvis' Prop. 13 in California and is the source of that state's structural revenue deficit as well. California's Budget Crisis: The Effects of Prop 13 – TIME:

[Howard] 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. In the state's current fiscal crisis, California's public schools stand to lose $5.3 billion on top of $7.4 billion in cuts last year. Superintendents and school boards foresee teacher layoffs, increased class sizes, the loss of computer labs and libraries and, in some districts, insolvency.

Why would Ms. Weaver want to introduce this dysfunction created by California's Prop. 13 in Arizona? Ideology — she is an anti-tax zealot.

[A]t the root of California's misery lies Proposition 13, the anti-tax measure that ignited the Reagan Revolution and the conservative era. In Washington, the Reagan-Bush era is over. But in California, the conservative legacy lives on.

If anything, Arizona desperately needs to get away from its over-reliance on the regressive sales tax for tax revenue and return to a balanced approach of income, property, sales and excise taxes/fees for service to alleviate its structural revenue deficit. Arizona's tax code needs a complete overhaul, but this is not possible as long as Prop. 105, the "mini-Prop. 13" two-thirds super-majority requirement, remains law. Ms. Weaver's "Prop. 13 Arizona" gimmick would only make our situation in Arizona far worse, like California.

I would be happy to buy Ms. Weaver a one-way bus ticket back to her "Prop. 13 Paradise" of California. Just stop trying to screw up my state, lady. The legislature is managing to do a fine job of it without your help.

UPDATE: To read this proposition, Click here for full text of initiative: PDF. Description: PROP 13 ARIZONA limits property taxes. Prop 13 Arizona caps the total property tax rate at 0.5% for all residential property and 1.0% for all other real property, eliminates all exceptions to the tax caps, and limits valuation increases to 2% or less per year.