How Proposition 13 Started the Tax Revolt That Reshaped the GOP

Picture a retired couple in California in the middle of the 1970s. They bought a modest house years ago. They paid it off. They have a small pension and a Social Security check, and they are not poor, but they are not going to get richer. Then one spring an envelope arrives from the county assessor. The value of the house has jumped, because the neighborhood has become fashionable and prices everywhere are climbing with inflation. The tax bill jumps with it. Their income has not moved an inch. The house they own free and clear has become a bill they may not be able to pay, and the bill comes with a threat: pay up, or lose the home.

That is a hypothetical, but it is a fair picture of what millions of California homeowners felt in the late 1970s. A few years of this and you get a revolt. In June 1978 the revolt got a number, Proposition 13, and in a political sense it has been with us ever since.

This post explains how the measure got on the ballot, what it did in plain English, how it spread, where its supporters and critics disagree, and why it matters to Republicans even today. I'll try to give the critics their due, because a good argument deserves a fair opponent.

Who started it

Two men are most closely tied to the measure. Howard Jarvis was a businessman and longtime tax activist who had been fighting property taxes for years and had come up short in earlier attempts. Paul Gann was a veteran of the same fight who ran an organization called the People's Advocate. Together they wrote an initiative that would amend the state constitution, and they gathered enough signatures from ordinary voters to put it on the ballot. It is worth noticing what that means. The politicians were not the source of this idea. The legislature had been asked for relief and had offered less, and a pair of citizens went around them.

There was a recent history that helped. In 1973, Governor Ronald Reagan had put a spending-limit measure, Proposition 1, before the voters, and it was defeated. Reagan's version was more complicated, and critics hit it hard. Jarvis and Gann wrote something simpler that anyone could understand in a sentence: your property tax bill is limited, and it cannot go up much from year to year. Simple wins on the ballot.

The sitting governor, Jerry Brown, a Democrat, opposed it, along with much of the state's political establishment, public employee unions and many newspapers. Reagan, out of office, supported it. On June 6, 1978, the voters approved Proposition 13 by a wide margin, roughly two voters in three.

What it actually did

Proposition 13 became Article XIII A of the California Constitution. In plain English it did four things.

1. It capped the rate. The maximum property tax was set at 1 percent of the property's value. Before the measure, local rates were set by the many governments that levied property taxes, and they had been climbing along with assessments.
2. It rolled back and limited assessments. Values were set back to what they had been in the 1975-76 tax year, and after that, the assessed value of a property could rise by no more than 2 percent a year, no matter how fast the market price rose.
3. It reset on sale. When a property was sold or newly built, it was reassessed at the current market price. The low base followed the owner, not the house.
4. It set a two-thirds hurdle for tax increases. Any change in state taxes that raised revenue needed a two-thirds vote in both houses of the legislature, and local special taxes needed two-thirds approval from the voters.

There is one more detail worth knowing. The 1 percent cap does not include extra charges for local bonds that voters approve for specific purposes, such as school construction. Those are added on top of the 1 percent. So the real bill on many California homes is a little higher than 1 percent of the assessed value. The principle remained: the people who would pay the bill got a vote on its size.

A worked example

Here is a hypothetical to make the mechanics concrete. It is made up for illustration, with round numbers.

Suppose a family buys a house in 1975 for $50,000. Under Proposition 13 the assessed value starts there, and the tax is 1 percent: $500 a year, setting aside voter-approved bonds. Suppose the market value of the house triples over the next decade, but the assessed value goes up at the maximum 2 percent each year. After ten years the assessed value is $50,000 multiplied by about 1.219, which is roughly $60,950. One percent of that is about $609.50.

Now suppose the family next door buys an identical house ten years later for $150,000. That house is assessed at its purchase price. One percent is $1,500.

The two neighbors have the same house, the same street and the same fire engine and school, and one pays $609.50 while the other pays $1,500. The difference is $890.50 a year. Hold on to that number, because it is the center of the fight over the law. Supporters say the long-time owner is getting what the measure promised: a bill she can plan for and cannot be taxed out of her home. Critics say the new buyer is paying a premium and the arrangement is unfair. Both statements describe the same arithmetic.

How supporters and critics see it

Here is the case for Proposition 13, stated the way its supporters would state it.

• It protected people on fixed incomes. Seniors who had paid off their homes could not be forced out by rising assessments on a house they were not selling.
• It gave households certainty. A buyer can look ahead and know what the tax will be in ten years, instead of guessing.
• It forced discipline on government. If a local government wanted more money, it had to persuade the voters, not just the assessor.
• It was democratic. Voters passed it on their own initiative, over the opposition of the establishment.

And here is the case against, stated the way critics would state it. I want you to be able to repeat it fairly.

• It is unequal across neighbors. Two similar properties can have very different bills based only on when they were bought, as the worked example shows.
• It shifted school funding to the state. Before 1978, schools drew heavily on local property taxes. Afterward, the state capital became the main source of school money, and critics say that weakened local control and made school budgets rise and fall with state finances. In 1988 California voters passed Proposition 98 to set a minimum funding level for schools, partly in response.
• It favors commercial owners. Because the rule resets on sale and many commercial properties are held in ways that rarely trigger a sale, critics say businesses gained more from it than homeowners did. A 2020 ballot measure to change how commercial property is assessed was rejected by the voters.
• It makes people stay put. A long-time owner who sells loses the low base, which gives some owners a reason not to move.

I'd answer several of those points, but not all. The inequality charge is real, and a reform conservative should say so. The answer is not to throw out the cap on the rate. It is to ask whether the cap can be redesigned so it protects the family on a fixed income without rewarding every holder of a low base. Several states have tried alternatives, which we compare in Proposition 13 and the Tax Revolt That Rattled Every Statehouse and Work Out Your Own Property Tax Bill With Mill Rates and Exemptions.

On the school-funding charge, the facts are mixed, and anyone who gives you a one-sentence answer is selling something. Before Proposition 13 the California Supreme Court had already held, in a case called Serrano v. Priest, that a school-finance system leaning on local property wealth violated the state constitution. After 1978 the state took over funding. Critics say that cut schools. Supporters say that school spending depends on state choices, and that the legislature has had decades to prioritize schools. If you want to judge your own district, use A Worksheet for Reading Your School District's Budget Line by Line.

How the idea spread

Proposition 13 did not stay in California. It showed politicians in other states that taxpayers were angry and organized, and it supplied a model.

• In November 1978, Michigan voters approved the Headlee Amendment, which limited state and local tax growth.
• In 1980, Massachusetts voters passed Proposition 2 1/2, which limited local property taxes to 2.5 percent of the full value of the property and limited yearly increases in the levy.
• In 1980, Missouri voters approved the Hancock Amendment, with limits on taxes and spending.
• Other states, from Idaho to Colorado, adopted limits of their own in the years that followed. Our post on How Colorado Voters Put a Leash on Their Own Legislature tells that story.

The details differ. Some states limited rates, some limited revenue growth and some required a public vote. The common idea is that voters, not only legislators, should have a say on the size of the burden. For a conservative, that is a principle you can defend whatever you think of the particular formula.

Why it reshaped the Republican Party

Before 1978, the Republican message on taxes tended to sound technical. It was about rates, brackets, depreciation schedules and the capital gains rate. That kind of talk can be persuasive to an economist and put everyone else to sleep.

Proposition 13 handed Republicans a different kind of argument, and it was populist. It said that the people who own homes, run shops and raise families are being squeezed by a government that grows whether or not their paychecks do. It did not need a chart. It could be explained at a kitchen table.

It also gave the party a new coalition. The voters angry about property taxes were not only wealthy investors. They were retirees, homeowners in modest suburbs, small business owners and union members. Many were Democrats. A party that had struggled to reach those voters now had an issue that did. That connects directly to the blue-collar story we tell in The Reagan Democrats of Macomb County and the Voters Who Changed Sides.

And it gave the party a national figure with a message. Reagan had backed the measure, and in 1980 he ran on a promise of lower tax rates and smaller government. A federal bill to cut income tax rates across the board by 30 percent over three years, sponsored by Representative Jack Kemp and Senator William Roth, had been pushed through the late 1970s, and the Republican platform of 1980 endorsed it. The Reagan tax cuts that followed are covered in The Reagan Tax Cuts Rate by Rate and the Tax Reform of 1986. You can draw a line from the 1978 ballot to the 1981 tax law, though it is a line with several stops along the way: inflation, bracket creep and a general sense that Washington was taking too much.

Historians argue about how much credit Proposition 13 deserves. Some say it was a symptom of an anger that already existed. Others say it was the spark. My view is that both are true. The anger came first, but the measure showed that the anger could win.

Three things people get wrong

It did not abolish the property tax. Californians still pay it, and local governments still collect it. What changed was the formula and who gets to change it.

It was not only about rich people. The loudest complaints came from homeowners whose incomes had not kept up with their assessments. Whether the measure ended up helping everyone equally is a different question from who was angry in 1978.

It was not the end of the argument. California has revisited its rules for property transfers, for commercial parcels and for school bonds many times since. A good law gets tested. If you support the principle that voters should control the size of the tax bill, you should be ready to defend the details in public, not hide behind the slogan.

What a family can do with this

You don't have to live in California for this to affect you. Almost every state has a property tax, and almost every state has some form of assessment limit, exemption or circuit-breaker for seniors or veterans. Here is a quick way to turn the history into action.

1. Get your assessment notice and read it. It lists the value assigned to your property. Check that the description (square footage, rooms) is right.
2. Learn your appeal deadline. It is usually short, and it is on the notice.
3. Ask what limits apply. Some states cap yearly increases, others offer homestead exemptions. Your county assessor's website will say.
4. Look at the ballot. Local bonds and levies are where your bill grows, and you get a vote.
5. Compare with your neighbors. If your bill looks out of line, the assessor's records are public.

The bottom line

• Proposition 13 passed in June 1978 by roughly two to one, capped the property tax rate at 1 percent, limited yearly increases in assessments to 2 percent, and required two-thirds votes to raise taxes.
• The central tradeoff is real: certainty and protection for long-time owners against unequal bills for neighbors. A fair-minded conservative acknowledges both.
• The measure spread to other states and gave Republicans a populist tax argument that fit on a bumper sticker.
• If you pay property tax, check your assessment, know your appeal deadline and vote on local bonds, because that is where the bill is set.
• When someone tells you that the tax revolt was simply greed, ask them how they would feel about a bill that rises faster than their income.