Who Can Possibly Govern California? - NYTimes.com.

In the view of many, the origins of the mud slog began with the passage of Proposition 13 in 1978, the landmark referendum that capped property taxes. “Over 50 percent of our revenue is dependent on personal income tax, and that’s a very important part of explaining the boom-and-bust cycle,” according to another Republican candidate for governor, Tom Campbell, an immaculately credentialed policy marvel who graduated from Harvard Law School magna cum laude and who later studied under the conservative economist Milton Friedman before going on to represent Silicon Valley for five terms in the United States Congress.

This bit of wisdom, about “boom-and-bust cycles,” goes deeper than Mr. Campbell might realize. He likely means that there is a boom-and-bust pattern in the revenues collected by the state personal income tax.

But there is a larger truth: that Proposition 13, by suppressing the property tax – or, more precisely, the portion of the property tax that fall onto land values – has made a significant contribution to CREATING the boom in housing prices and the resulting bust. Other states, of course, have experienced it too, but the two worst have been the two states with the annual property tax assessment caps, California and Florida.

Taxing land value, and taxing it rather heavily (which provides sufficient income to replace a lot of sales and personal income taxes) has the delightful benefits of

  • lowering the price of housing,
  • stabilizing the flow of the revenue necessary to provide all those services which make a community or state a good place to live, and,
  • most important, stabilizing the economy of any place smart enough to utilize it.

Powerful interests care deeply about keeping the property tax to a minimum.

Smart interests should care about keeping the part of the tax which falls on buildings, of all sorts, to a minimum.

But wise interests would move California toward taxing its land value more heavily, and treating all of California’s landholders as if they were created equal, and, indeed, as if they believed all Californians to be created equal.

This can be a difficult concept for those who think the current system treats them well, or that they will someday enter the subset in whose favor it is currently rigged.