While there are a multitude of factors that have lead to the decline of the Californian economy, none have had such chronic and deleterious effects that proposition 13. Both a bane and a blessing, proposition 13 did not develop out of a vacuum, but through to a specific series of sociopolitical-economic events that shaped public opinion and triggered the emotions that influenced California voter political judgment and behavior. For this reason it is critical to examine this past political environment in California to better understand the conditions of the political climate we face today.

In 1965, a tax assessors scandal broke out, in which several property tax assessors from around the state were caught taking bribes from two Oakland tax consultants. In exchange, the offending tax assessors gave property evaluations on the consultant's personal properties below the true value, thus essentially giving the consultants a tax break. Public reaction to the scandal as a testament to the corruption of public officials led to the passage of AB 80 in 1966, which required property assessments to be at a certain percentage of market value. This attempt at regulating corrupt assessors resulted in property tax increases for homeowners who traditionally received informal undervaluation's, while the traditionally inflated assessments on corporate properties became tax breaks. The ensuing property tax increases on homeowners due to skyrocketing property values became one of the elements for the tax revolt in California.

In 1971, the California Supreme Court ruled that California's school funding structure was a violation of equal protection rights in the case of Serrano v. Priest. The result of this class-action lawsuit identified that school funding based on local property taxes created disparities in per-pupil spending between districts with different property values. The subsequent Supreme Court rulings required California to restructure its school funding so that  per-pupil spending could only vary by $100. However, despite restructuring, disparities in per-pupil spending well exceeding $100 continue to persist. Furthermore, the restructuring only related to general fund spending, and did not address the inequalities in education in regards to funding infrastructure and facilities. This restructuring also sparked sentiments of resentment by constituents from districts with higher property values, who felt that it was unfair that their taxes would not go toward education in their district. These series of events led  to a brewing public opinion perceiving government as corrupt, inefficient, and incapable of spending tax dollars properly.

By 1977, the effects of AB 80, as well as a growing population, sent property values in California skyrocketing,sometimes increasing by 50-100% in that year alone. This situation was particularly detrimental to homeowners on fixed incomes who could not afford the respective tax increases, and were therefore under the threat of losing their homes. With the public image of the state government victimizing the elderly with taxes, the tax revolt in California went in full swing with Howard Jarvis and proposition 13 at the helm. By limiting property assessments to time of purchase, and capping property tax increases at 2% per year, prop 13 protected homeowners on fixed incomes from volatile property fluctuations. Proposition 13 also required a 2/3 majority vote for any tax increase imposed by the California state Legislature or Senate. While scarcely a few paragraphs, proposition 13 has had massive effects on California state politics and economy for the past 30 years.

California on Red Alert:
The Aftermath of Proposition 13
By
Daniel Villanueva

It has been sometimes difficult to elucidate the long-term effects of proposition 13 over the past 30+ years. Some proponents for Proposition 13 claim that $528 billion dollars have been saved in property taxes over that time period. However, this does not take into account increases in income and sales taxes for the loss in property tax revenue; taxes which disproportionately effect lower income brackets and private homeowners. To test the hypothesis that proposition 13 significantly increased personal income and sale taxes over corporate tax, a one-way ANOVA was conducted on the data set provided by the 2009 California Governors budget between the eight years before and after 1978 . A Pearsons correlation analysis and a regression analysis between personal income tax and corporate tax revenues, as well as sales tax and corporate tax revenues was also conducted.
 

Graphs

Graph 1.1. This Graph reveals a growing disparity between the tax burden placed on Californians through sales and use taxes, and personal income taxes; and that placed on corporate income taxes over the past 30 years.

Graph 1.2. This graph reflects the ratio between personal income tax and corporate tax to adjust for inflation over time. The line of regression reveals that the disparity between personal income tax and corporate tax shares an overall positive correlation.

Graph 1.3. This graph illustrates the ratio between sales tax and corporate tax to adjust for inflation over time. While erratic, sales tax revenues tend to be more volatile than personal income tax revenues. The regression line reveals an overall positive relationship of the index, indicating a disproportionately increasing burden on sales tax in comparison to corporate tax.

Tables

Table 1.1.  This Pearsons correlation analysis reveals that there is a significant correlation between personal income tax and corporate income tax.

correlation between personal income tax and corporate income tax.

Correlations
		Corporation	Personal Income
Corporation	Pearson Correlation	1	.931**
	Sig. (1-tailed)		.000
	N	35	35
Personal Income	Pearson Correlation	.931**	1
	Sig. (1-tailed)	.000
	N	35	35
**. Correlation is significant at the 0.01 level (1-tailed).

 

 

Table 1.2. This Pearsons correlation analysis reveals a significant correlation between sales tax and corporate tax revenues.

Correlations
		Corporation	Sales and Use
Corporation	Pearson Correlation	1	.963**
	Sig. (1-tailed)		.000
	N	35	35
Sales and Use	Pearson Correlation	.963**	1
	Sig. (1-tailed)	.000
	N	35	35
**. Correlation is significant at the 0.01 level (1-tailed).

 

Table 1.3. This ANOVA from a regression analysis reveals that both personal income tax and sales tax vary significantly from corporate tax.

ANOVAb
Model		Sum of Squares	df	Mean Square	F	Sig.
1	Regression	1.426E14	2	7.130E13	203.637	.000a
	Residual	1.120E13	32	3.501E11
	Total	1.538E14	34
a. Predictors: (Constant), Personal Income, Sales and Use
b. Dependent Variable: Corporation

 

 Table 1.4. This one-way ANOVA analysis reveals that both indices vary significantly over time.

ANOVA
		Sum of Squares	df	Mean Square	F	Sig.
Sale and Corporate Tax Index	Between Groups	3.820	4	.955	5.431	.002
	Within Groups	5.276	30	.176
	Total	9.097	34
Personal Income and Corporation Index	Between Groups	41.248	4	10.312	23.413	.000
	Within Groups	13.213	30	.440
	Total	54.461	34

 

 

Table 1.5. The post hoc test reveals that while there is significant difference between indices over time, there is no significant difference in the indices immediately before and after 1978.

Multiple Comparisons
Tukey HSD
Dependent Variable	(I) Before and After 1978	(J) Before and After 1978	Mean Difference (I-J)	Std. Error	Sig.	95% Confidence Interval
						Lower Bound	Upper Bound
Sale and Corporate Tax Index	1971 - 1978	1979 - 1986	.05253	.20969	.999	-.5557	.6608
		1987 - 1994	-.22230	.20969	.825	-.8305	.3859
		1995 - 2002	-.66980*	.20969	.025	-1.2780	-.0616
		2003+	-.87784*	.28392	.032	-1.7014	-.0543
	1979 - 1986	1971 - 1978	-.05253	.20969	.999	-.6608	.5557
		1987 - 1994	-.27483	.20969	.687	-.8831	.3334
		1995 - 2002	-.72233*	.20969	.014	-1.3305	-.1141
		2003+	-.93037*	.28392	.021	-1.7539	-.1068
	1987 - 1994	1971 - 1978	.22230	.20969	.825	-.3859	.8305
		1979 - 1986	.27483	.20969	.687	-.3334	.8831
		1995 - 2002	-.44749	.20969	.233	-1.0557	.1607
		2003+	-.65554	.28392	.170	-1.4791	.1680
	1995 - 2002	1971 - 1978	.66980*	.20969	.025	.0616	1.2780
		1979 - 1986	.72233*	.20969	.014	.1141	1.3305
		1987 - 1994	.44749	.20969	.233	-.1607	1.0557
		2003+	-.20804	.28392	.947	-1.0316	.6155
	2003+	1971 - 1978	.87784*	.28392	.032	.0543	1.7014
		1979 - 1986	.93037*	.28392	.021	.1068	1.7539
		1987 - 1994	.65554	.28392	.170	-.1680	1.4791
		1995 - 2002	.20804	.28392	.947	-.6155	1.0316
Personal Income and Corporation Index	1971 - 1978	1979 - 1986	-.46348	.33183	.634	-1.4260	.4990
		1987 - 1994	-1.12411*	.33183	.016	-2.0866	-.1616
		1995 - 2002	-2.70171*	.33183	.000	-3.6642	-1.7392
		2003+	-2.76111*	.44930	.000	-4.0643	-1.4579
	1979 - 1986	1971 - 1978	.46348	.33183	.634	-.4990	1.4260
		1987 - 1994	-.66062	.33183	.295	-1.6231	.3019
		1995 - 2002	-2.23822*	.33183	.000	-3.2007	-1.2757
		2003+	-2.29763*	.44930	.000	-3.6009	-.9944
	1987 - 1994	1971 - 1978	1.12411*	.33183	.016	.1616	2.0866
		1979 - 1986	.66062	.33183	.295	-.3019	1.6231
		1995 - 2002	-1.57760*	.33183	.000	-2.5401	-.6151
		2003+	-1.63700*	.44930	.008	-2.9402	-.3338
	1995 - 2002	1971 - 1978	2.70171*	.33183	.000	1.7392	3.6642
		1979 - 1986	2.23822*	.33183	.000	1.2757	3.2007
		1987 - 1994	1.57760*	.33183	.000	.6151	2.5401
		2003+	-.05940	.44930	1.000	-1.3626	1.2438
	2003+	1971 - 1978	2.76111*	.44930	.000	1.4579	4.0643
		1979 - 1986	2.29763*	.44930	.000	.9944	3.6009
		1987 - 1994	1.63700*	.44930	.008	.3338	2.9402
		1995 - 2002	.05940	.44930	1.000	-1.2438	1.3626
*. The mean difference is significant at the 0.05 level.

Conclusions: The Pearsons correlation and regression analyses reveal that there is a statistically significant relationship between sales tax and corporate tax; and income tax and corporate tax in California. While the one-way ANOVA and the residual post hoc tests did not reveal a significant change in indices immediately before and after proposition 13, there was a significant change in the indices over time. This may be due to insufficient data for the years prior; as well as the possibility that the changes that occurred due to proposition 13 took longer to manifest than the number of given years per group. Since property tax is categorized under personal income tax, the significant difference between the before proposition 13 years and the 1987-1994 bracket for personal income tax reflects the gradual increase of the property tax burden on new businesses and homeowners.