on the cover / By Steven T. Jones and Tim Redmond

The Broken State

So when Jarvis showed up with petitions to roll back property taxes and prevent future increases, he found a broad base of support. Even tenants went along — Jarvis and his gang promised that property-tax cuts would be passed on to tenants and would mean the end of the escalating rent hikes. Jarvis collected signatures for a radical measure that essentially blocked all property tax increases and allowed new assessment only when a parcel sold. It was, in the end, a huge tax giveaway to major corporations. Since commercial property turned over far less often than residential property (and since commercial sales could be hidden as stock transfers), big businesses wound up paying far less of the state’s tax burden. Corporations used to pay about two-thirds of the state’s property taxes, and individuals one-third; now that is reversed.

It didn’t help tenants, either. Few of the landlords who saw the benefits of Prop. 13 passed the money along to their renters. Most just kept it. San Francisco activist Calvin Welch likes to say that Howard Jarvis was “the father of rent control.”

The campaign against Prop. 13 warned of the dangers of cutting local government; police and fire chiefs appeared in ads opposing it. But the No on 13 folks never talked about the huge windfall big corporations would get from the measure, or the huge disparities in wealth that would be created by defunding government and deregulating corporations.

If the goal was to skew the concentration of wealth in the state, it worked brilliantly. According to the California Budget Project (CBP) of the Franchise Tax Board, recent data taken before the current economic recession illustrates an ever-widening chasm between the wealthiest taxpayer and the working-class person. The total adjusted personal income for Californians rose by nearly $64 billion in 2006-07 — with approximately three-quarters of that increase going to the top fifth of wealthiest taxpayers, and 30 percent going to the top 1 percent. That left only $19 billion for everyone else.

“The average taxpayer in the top 1 percent experienced a $128,261 increase in AGI [adjusted gross income] between 2006 and 2007, which was more than three times the total AGI of the average middle-income taxpayer in 2007 ($36,115),” stated the June 2009 report.

This continues a long-term trend in which the wealthy continue to leave the average income-earner behind in a trail of dollar-sign dust. From 1995 to 2007, income gains for that top 1 percent come to a whopping 117.3 percent increase — nearly 13 times more than the gains of the middle-income taxpayer. The nation’s income gap has reached a “level higher than any other since 1917,” according to a paper by University of California, Berkeley economic professor Emmanuel Saez. According to Saez’s analysis of census data, there’s been a steady increase in the income gap since the 1970s, rising 20 percent over the years.

Yet even today, the defenders of Prop. 13 continue to sound the same consistent themes. “Those who are directly involved in government are a militant special interest,” Howard Jarvis Taxpayer Association executive director Kris Vosburgh told us. “They don’t like anything that limits their revenue stream.”

While that last statement could be applied equally to corporations or other private sector enterprises, as Vosburgh reluctantly admitted when asked, he continues to imply malevolence to those who defend government. He said the state’s current fiscal collapse can only be solved by slashing government expenditures.

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