Property tax limits, East and West: the squeeze is on; California: host of tax-cut measures adds to growing burden of Prop. 13
Whatever Proposition 13 has done to California it hasn't done alone. When Californians in June 1978 voted overwhelmingly for the Howard Jarvis-Paul Gann proposal to chop local property taxes by more than half, they removed some $9 billion a year from the tax side of the economic scale.
It was a huge tax cut, admits legislative analyst Bill Hamm. But he adds: "If the state only had Prop. 13 to deal with, it probably would be in pretty decent shape."
In August 1978 the Legislature passed a law indexing personal income taxes to inflation -- a move to keep wage-earners from being pushed into higher and higher tax brackets. Because of this, the state collected $1.8 billion less in 1980 and will collect $2.7 billion less this year.
Other laws enacted in 1979 and 1980 have exempted certain business investments form property taxes, causing, a revenue loss of some $555 million this year; provided homeowners' exemptions amounting to $335 million; and lowered gift and inheritance taxes at a tax cost this year of $129 million. With other, smaller reductions, the tax cut total amounts to more than $13.5 billion this year.
Because of inflation, state revenue from income taxes has continued to rise in spite of the cuts. But state Controller Kenneth Corey says the effect of the general economic downturn, Prop. 13, and other tax reductions resulted in revenue at all levels of government being down $46 billion as of Jan. 1, 1981. And, he notes, there was no corresponding decrease in expenditures.