Proposition 13 is routinely reviled by those in the political class. But if they were fair, they should admit some gratitude for it now.

That’s because property-based tax revenues to governments in California haven’t dropped much at all, even though property values have plunged sharply. That’s thanks to Proposition 13’s stabilizing effect on property taxes.

Let’s stop for a moment and let this soak in. I mean, how amazing is this? We’ve seen property values in California plunge faster and further than anytime in our lives, further even than Manny Ramirez’s batting average, yet the tax revenue based on those properties has declined just a couple of percentage points this year statewide.

Considering that many businesses and households have seen their revenue or income swoon by 10 percent, 20 percent, 30 percent or more, and have chopped their budgets accordingly, a little trim of a couple points should feel like a complete and utter victory.

Proposition 13 was passed 31 years ago because a big majority of Californians were sick of runaway property tax bills. Some folks, particularly retirees, were shocked to get property tax bills that they could barely pay, or couldn’t pay at all and had to sell their homes. Proposition 13 did indeed tether the bills, holding down the amount of taxes that otherwise would have been paid because of rising property values.

But what was not apparent when it passed was that Proposition 13 would work the other way; it would keep tax bills higher than they otherwise would have been when property values tank.

“No one mentioned this as an advantage in the campaign,” wrote David Doerr, who was active in the Proposition 13 movement and is now at the California Taxpayers Association.

For example, he said, take a resident who buys a property for $100,000, which becomes the “base year” amount on which his property tax bill is based. Years go by, and the property becomes worth $300,000. The property owner’s tax bills each year only goes up as much as 2 percent a year for inflation, which means the government misses out on the bounty that it could have gotten from the rising property value.

But today the government is getting a break (although the homeowner isn’t) even as the property’s value is falling. That’s because the property owner’s tax bill is still based on the base year amount. In other words, he’s paying taxes on the same base year amount he always was; he may even pay a bit more because of inflation. Property value tanks; the government still gets its check.

But it gets better for the government. Let’s say our homeowner sells at the lower price of $270,000. The base year is reset at that amount and the new owner pays much higher property tax. So the government gets a bounty.

Doerr pointed out that in the early and mid-1990s, the median sale prices of homes in California declined for five straight years. Yet the total assessed values of single-family homes increased in each of those years. In other words, the total of property taxes went up even though property values went down. Proposition 13 helped governments stabilize their tax revenues.

So, will we hear some expressions of gratitude from the political class? Well, you can wait if you want.

Charles Crumpley is editor of the Business Journal. He can be reached at

[email protected].