Last week this column was devoted to D-Day, June 6, 1944. This is also the week, we will look at another important event that happened on June 6, 1978. This was the date that Proposition 13 was passed by two-thirds of California voters.
Proposition 13 was the people’s response to Lincoln’s advice about getting rid of a bad law. Lincoln said, The best way to get a bad law repealed is to enforce it strictly.
While some people complain that public employees are lazy and don’t really work, in California the county property appraisers were not this way. They were very efficient at increasing property tax values to keep up with the growing real estate values, a lot powered by inflation, during the late 1960’s and 1970’s in California.
In many cases, the county property assessors looked not to the value of an existing home or building but at the value of the highest and best use of the property. So if a residence could be torn down and replaced by a commercial structure, the property taxes were assessed based on the higher commercial value.
It was not uncommon that some families were seeing 50% to 100% increases in their property taxes in one year. Some families were paying more in property taxes than they were paying on their mortgage.
When the homeowners tried to complain, they found that filing appeals that contested the valuations were rarely successful. If the property owner did not pay the property taxes, then the county would file to foreclose the property and then resell it and pocket the delinquent taxes. This increasing encroachment by government mobilized the people.
California Constitutional Amendment
California allows its citizens to amend the state constitution with a voter-initiated ballot. Two activists, Howard Jarvis and Paul Gann, led a movement to pass a constitutional amendment that property taxes would be limited to one percent of the acquisition price of both residential and commercial property. Property taxes could only be increased by two percent of the property tax amount per year. When a property was sold, it was valued at the new acquisition price.
Government Opposition
Of course, there was a steady parade of California government officials warning that limiting the amount of property tax was going to cause all of the schools to close and many important government services to be terminated. The people did not believe them and Proposition 13 was overwhelmingly passed.
Did California Services Collapse?
The immediate reduction in the average property tax rate and the limiting of the property tax to one percent of the acquisition price for residential and commercial real estate did result in lower revenue. However, the state found that state and local revenues were reduced by only one percent in fiscal year 1979. By fiscal year 1980, total revenue had risen more than 10 percent above the fiscal year 1978 level. The tax base expanded by more than enough to offset the reduction in tax rates and, no surprise, many people used their property tax savings to purchase other goods that were subject to the state sales tax.
California’s Proposition 13 and the FAIRtax
One of the fears of many of the elites is that passing the FAIRtax will result in a reduction of their ability to control government revenues. The D.C. elites think that they “know best” what is good for people. By being able to grab the money from paychecks, they believe that they don’t have to be accountable. With the FAIRtax, the power to pay taxes is in the hands of the citizens.
Unlike local real estate taxes, where governments coerce payment or you lose your property, if someone is not an employee, then they have to pay income and payroll taxes based on their calculations of their “net” income. For a long time, the elites have used the “fear” of the IRS to convince many that they should comply. For a long time, we were told that our income tax/payroll tax system was a voluntary system and how great it was that Americans, unlike citizens of many other countries, paid the taxes they owed.
Well, that was then and this is now. As we have said before, more and more workers are becoming independent contractors and they are deciding to evade income taxes in growing amounts—estimated at $600 billion for last year. Since the chances of “catching” these tax evaders is very low, the problem will just get worse—as Professor Cebula points in out in this week’s FAIRtax Friday.
Conclusion
Many of our politicians view the increasing problems with our existing income/payroll tax system in the same way as some drivers. Some drivers practice “radio maintenance.” Radio maintenance is when you are driving down the road and hear a funny sound from your engine, but you don’t pull into a repair facility. Instead, you just turn up the volume on the radio and keep driving. Of course, the engine problem gets worse and at some point in the future, the engine will stop.
The fuel that allows the federal government to operate is derived largely from our income/payroll tax system. Like the driver practicing “radio maintenance”, by simply turning up the volume of the radio, the politicians and their elite friends seem to think that by ignoring the problem, it will go away. Like the driver, if they pull over and fix the problem today, they will find it is far less of a problem than if they waited for the system to die.
1040 Club and Contributions
Thanks to all of you who are joining and/or remaining members of the 1040 Club. AFFT's 1040 Club members contribute $10.40 per month to AFFT. This provides a steady funding platform and allows us to ensure that we keep the pressure on the elites to prevent them from “putting lipstick on a pig” and not doing real tax reform.
If you are not yet a member of the 1040 Club, or if you are a member but want to join for someone else, please go to this link and sign up.
If you believe that all you can contribute to our efforts is $10, please go to FAIRtax.org and donate. We have our best chance now and need your help. Many of us prefer to make one donation as opposed to monthly donations and this greatly helps.
FAIRtax Power Radio
There are many ways in which people can help us educate more Americans about the FAIRtax. In Programs 29 & 30, the FAIRtax Guys (Bob Paxton and Ron Maiellaro) describe how listeners can support and promote our efforts. Program 29 concentrates on simple but effective things for people with busy schedules, whereas Program 30 suggests some activities that might take a little more time. The programs are free to the listeners. Please share these links with your friends and relatives.
We're pleased to announce that FAIRtax Power Radio is now available on iTunes and Spreaker. A new episode will be posted every Friday morning but you can listen at any time by going to one of these sites. There is no cost to listen. By this time next week, we expect to be on iHeart Radio too.
Recently Bob and Ron decided to start from scratch discussing the many problems with the current income tax system and the reason why REAL tax reform is so desperately needed in our country. In episode 3, Thomas Jefferson paid them a visit and gave his opinion of our federal income tax. As you might guess, he wasn’t very happy with what he saw. Then we searched for “the perfect tax system”.
In future episodes, you will hear from Bob “Paxworthy” famous for his “You Might Be A FAIRtax Fan!” routine. The FAIRtax Guys are always open to your thoughts and opinions. You can contact them at thefairtaxguys@gmail.com.
Episodes are still available on SoundCloud and YouTube but Spreaker is the site that lets up branch out to other, more popular sites that cater to podcasting.
The FAIRtax Guys will continue with FAIRtax Power Radio until HR 25 becomes the law of the land in 2017. After that, I’m sure the episodes will go into the Radio Hall of Fame! Please share this information with your constituents and anyone else you care to. The more people we educate about the FAIRtax, the better the chances are that it will become a reality next year.
To listen to FTPR on SoundCloud (free and audio only) go to these links:
FTPR Program 29 on SoundCloud
FTPR Program 30 on SoundCloud
FTPR Program 29 on YouTube
FTPR Program 30 on YouTube
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