California’s property taxes not as low as you think

Some like to claim that Proposition 13 has decimated local government revenue and made California a low property tax state, but this is hardly the case.

While Proposition 13 has succeeded in preventing property tax hikes as large as many big-government proponents might wish (not to mention providing a stable revenue stream that is largely insulated from the sometimes dramatic shifts in property values), local governments are far from starved for revenue.

California has an effective tax rate of 0.81 percent, or 81 cents for every $100 of assessed value, according to a recent study by WalletHub. That ties us with Arizona for just the 33rd-highest rate in the nation (including the District of Columbia), which sounds pretty good.

Unfortunately, since housing prices are so ungodly in the Golden State — the $385,500 median value was the third-highest (behind only Hawaii and D.C.), and more than twice the $178,600 U.S. median value in 2015 — that Californians still end up paying much more than most in property taxes. When calculated based on the median home value, California’s $3,104 in annual property taxes shot up to 11th in the nation.

This is somewhat to be expected, given the higher standard of living. To gain a better understanding of how much of a burden these property taxes really are, Orange County Register reporter Jonathan Lansner compared the median property tax payments to median annual incomes ($64,500 here in California) and found that the state’s 4.8 percent share of income ranked 10th worst among the states.

Keep in mind that this is only one aspect of the tax burden placed on California residents. A number of states — such as Alaska, Florida, Nevada, South Dakota, Texas and Washington — have higher property tax rates than California, but that is largely because they do not have any income tax. In addition to its onerous property taxes, California has not only the highest marginal income tax rate, but the highest four income tax rates, the highest state sales tax, the ninth-highest corporate income tax rate and the fifth-highest gas tax rate.

And while Prop. 13 succeeded in keeping down property taxes, cities and counties have found creative ways to increase overall tax revenue per person, such as by imposing and raising sales, utility and hotel taxes; development impact fees and Mello-Roos assessments, the latter two of which are used to pay for infrastructure and other costs related to developments. In fact, city and county “own-source” revenues (not including state or federal funds) have increased 36 percent, adjusted for inflation, from roughly $2,600 per person in 1977-78, just prior to the implementation of Prop. 13, to roughly $3,440 per person, the Legislative Analyst’s Office noted in a September report.

As we noted in an editorial on Friday, California is in the midst of a severe housing crisis — largely as a result of taxes, fees, regulations, restrictive zoning ordinances and other anti-growth state and local government policies that have suppressed housing supplies and driven up prices dramatically. Whether through burdensome regulations, parcel tax hikes or higher development fees — which average almost $32,000 for a typical $200,000 three-bedroom home, nearly three times the national average, according to consulting firm Duncan Associates — governments are increasingly pricing Californians out of the housing market and putting the “California dream” out of reach.

Particularly with a spendthrift Democratic supermajority in control of the Legislature, Prop. 13 is one of the few remaining checks on the growth of government. Rather than scapegoat it for not facilitating the fantasies of big-government politicians, we should seek to enact similar limits on all the other creative revenue sources they have devised.