Revolt Over Taxes

Aroused California voters confront a beguiling proposition

Rising taxes are a burning concern all over the U.S. In California, they are nothing less than an obsession, and small wonder. Already saddled with one of the highest state income taxes in the nation, many Californians were hit last week with new assessments on their homes that could send real estate taxes soaring by more than 100% in many cases and in some instances by an incredible 1,000% or more. The dizzying increases will mean a drastically reduced standard of living for most property owners; many will be forced to sell out and move elsewhere.

The new taxes poured fuel on a fire that was already raging nearly out of control, largely because of the volatile Proposition 13, which goes before California's voters next week. Perhaps the most emotional issue to sweep across the state in a generation, the celebrated proposition has gathered astonishing grass-roots support. It has at least a fifty-fifty chance of becoming law. If it does, property taxes for all Californians will be slashed by 57%, beginning July 1. City, county, town and school administrators figure that they would lose some $7 billion a year. Either they would have to curtail services severely or the state, whose budget already totals $12.5 billion, would have to rescue them--presumably by increasing other taxes. As a result, officials are bracing for what they call "Black Wednesday," fearful that they may awaken on June 7 to find that the long-brewing taxpayers' revolt has become a reality.

Even for placard-prone California, the spontaneous sprouting of signs for and against 13 has been sensational. Thousands of homeowners display the size of their tax increases in their front yards. Bumper stickers have blossomed on battered Bugs and sleek Mercedes alike. Assessors' offices have been besieged by taxpayers anxious--and afraid--to learn how hard they will be hit.

The revolutionary proposition was placed on the ballot by the largest avalanche of petition signatures (1.5 million) in California's initiative-studded history. It has totally dominated the state's primary-election season. Voters seem to be judging the candidates on only one issue: Where do they stand on 13?

The furor has turned Howard Jarvis, 75, into a statewide folk hero to millions of Californians, a demagogic devil to others. A retired millionaire manufacturer, Jarvis has been railing against high taxes for 15 years. Jarvis, whose face looks a bit like a California mudslide, has been demolishing debating opponents with his oddly compelling blend of verbosity, profanity and humbug. He has enlisted U.C.L.A. Economist Neil Jacoby to polish his simplistic arguments about the stultifying impact of the rising property tax. Nobel-prizewinning Economist Milton Friedman, now teaching at Stanford, made TV commercials free of charge to back 13. Claims Friedman: "If we continue the growth of government and its involvement in our lives, it will destroy us." Former Governor Ronald Reagan has rallied behind Jarvis. All but invisible in the campaign is Paul Gann, 65, a retired real estate salesman who heads a Sacramento-area anti-tax lobby, People's Advocate, and shares billing on the ballot (Proposition 13 is also known as the "Jarvis-Gann initiative").

As the showdown over the fiery issue approaches, some grim facts account for its support. Californians already endure one of the nation's highest state sales taxes: 6%. Because the stiff state income tax is withheld, it is relatively painless. But property taxes must be paid in a lump sum twice a year--and this hurts. Moreover, since 1971, property has been taxed at rates ranging from 3% to 3.5% of real market value, and that value has been soaring; many homes have tripled or quadrupled in value in the past five years. Homeowners' incomes have not nearly kept pace with their rising tax burdens.

Last week there were some agonizing examples of precisely what that means.

Many residents rushed to their local assessor's office to find out what they will have to pay next December if Proposition 13 fails. There were some devastating jolts. One newcomer to West Hollywood paid $3,700 in 1977 on his two-bedroom, $120,000 house; this year he could pay more than $7,000. Another new Californian was taxed $5,500 on his three-bedroom, $165,000 Beverly Hills house in 1975; his tax bill could be $14,600 this year. The outcry by aroused Californians over such hikes has given a last-minute surge to the pro-13 drive.

The Jarvis proposition would check such increases by limiting the tax on all property, commercial as well as residential, to 1% of its market value. If a house has not been sold since 1976, the cash value would be whatever appeared on the public records in that year--another rollback from current sales values. The proposition would limit any tax raise by local governments to 2% per year and require any new statewide taxes to be approved by a two-thirds vote of the legislature.

Worried public officials vow to fight Proposition 13 in the courts if it is ap proved next week. They intend to challenge it on a wide variety of legal grounds, including its possible unconstitutionality. But in hopes of preventing passage, they have also launched a public relations blitz.

Los Angeles County has designated 37,000 potential dismissals, publishing a list of employees by seniority--a not so subtle means of lighting a fire against 13. School boards have sent notices to thousands of teachers that they may be laid off. Librarians have been warned that 60% of the state's libraries may have to close. The U.C.L.A. Business Forecasting Project estimates that the proposition would cost 451,000 jobs in the state, push the unemployment rate, now 7.3%, to 10.1%, and shift $2.7 billion to the Federal Government because of lowered property-tax deductions on IRS forms.

A broad coalition has banded together to fight the proposition. It ranges from the state A.F.L.-C.I.O. to Southern California Edison, from the Federated Fire Fighters to the Sierra Club. This dizzyingly eclectic "No on Proposition 13 Committee" is supporting an alternative package. It includes a proposed constitutional amendment, Proposition 8, and a bill approved by the legislature that together make up what Democratic Governor Jerry Brown calls "the greatest tax-cut package ever produced in the United States." The complex legislation would offer homeowners, but not businesses, a 30% property-tax cut; give renters an annual $75 cash rebate (60% of the state's voters do not own homes); and tie the future growth of local and state government spending to the growth in average personal income. It is an impressive package, but Californians are aware that it would not be on the ballot if Proposition 13 had not become such a threat.

To counter complaints about the latest tax hikes and take some of the steam out of 13, the Los Angeles County board of supervisors last week took a rare step. It urged County Assessor Alexander Pope, who is seeking reelection, to freeze property-tax assessments at the current level. He did so, but the county's legal experts doubt that the assessor can order such a rollback under state law.

Brown, who is campaigning hard --and at some political risk--against 13, figures that Sacramento can live with Proposition 8 because of the $3.36 billion surplus he has amassed in the state budget. This surplus is a source of taxpayer agitation. Proposition 8 would, in effect, result in a transfer of some of that money to local governments to make up for the funds they would lose because of the proposed property-tax cut. But, insisting that he is always willing to "flow with the flow," the Governor says: "If the people give me 13, I'll solve it. I am not going to raise taxes. But my solution will make millions of people unhappy." Of the four Republicans waging a primary fight for the chance to unseat Brown, the two who support 13 lead the two who oppose it.

The election has other complications.

What if both tax-cutting measures gain the votes of a majority on June 6? For complex reasons, Proposition 13, as a popular referendum, takes precedence over Proposition 8, a proposed constitutional amendment. Only if 13 fails to get 50% approval can 8 become law.

A the vote nears, Californians seem almost evenly divided on 13. The respected California Poll shows the proposition leading, 42% to 39%, with 19% undecided. Polling experts are amazed that fully 94% of the state's registered voters are aware of the proposition--astonishing recognition for an initiative measure. Only 46% of the voters have made up their minds on Proposition 8 (26% are in favor, 20% opposed).

As they contemplate Black Wednesday, public officials in California admit being taken by surprise at the vehemence of the tax revolt. Said one in Los Angeles: "The voters in this state are always bitching about something. They've been complaining for years about property taxes and nothing has happened. How were we to know that this time it's serious?" It's serious.

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