Prop. 13 property taxes in the voters' hands PROPOSITION 13: 30 YEARS LATER Popular state initiative saves property owners billions but severely limits governments

Glenn and Yoshie Kameda, left, who have lived in their home at 733 Oregon Ave. since 1993, Kent and Liz Libbey and their sons Hayden Libbey, 9, and Gavin Libbey, 11, have lived in their house next door at 737 Oregon Ave. since 2008, in Palo Alto, Calif. on Thursday June 5, 2008.Photo by Katy Raddatz / The Chronicle less Glenn and Yoshie Kameda, left, who have lived in their home at 733 Oregon Ave. since 1993, Kent and Liz Libbey and their sons Hayden Libbey, 9, and Gavin Libbey, 11, have lived in their house next door at 737 ... more Photo: KATY RADDATZ, The Chronicle Photo: KATY RADDATZ, The Chronicle Image 1 of / 4 Caption Close Prop. 13 property taxes in the voters' hands 1 / 4 Back to Gallery

Thirty years ago today, California voters overwhelmingly approved Proposition 13 as a way to keep seniors from losing their homes to skyrocketing property taxes. But the 1978 vote also ignited a revolution that dramatically changed the way people across America look at government and taxes.

The grassroots initiative has saved California property owners billions of dollars since it was passed, but the shackles Prop. 13 put on the ability of state and local governments to increase taxes could turn out to be its most important legacy. Even today, with the state facing a $17 billion budget shortfall, tax increases face certain opposition from many legislators and voters.

"Clearly, the Prop. 13 movement had the general attitude ... that government and its ability to tax people isn't to be trusted," said Mark Baldassare, head of the nonpartisan Public Policy Institute of California. "That's very much the theme that Ronald Reagan picked up when he ran for president in 1980, and it's had a dramatic impact on national politics, particularly on the Republican side."

When GOP Rep. Newt Gingrich of Georgia put together his "Contract with America" in 1994 as part of the successful Republican effort to take control of Congress, his call for requiring a three-fifths majority vote on tax increases was straight out of Prop. 13. And when liberal Democratic Illinois Sen. Barack Obama says that, as president, he would reverse President Bush's tax cuts only for the wealthiest Americans, he recognizes the same middle-class antipathy to taxes that Prop. 13's backers saw three decades ago.

A distrust of officials

Both Howard Jarvis and Paul Gann, the public faces of Prop. 13, disliked government almost as much as they despised taxes, and neither was willing to trust elected officials to do the right thing with the public's money.

That's one reason the measure not only put tight limits on property taxes but also required a two-thirds vote of the Legislature for state tax increases and a two-thirds vote of the people for most local tax boosts.

"The disaster of the moment was that people were being taxed out of their homes," said Joel Fox, past president of the Howard Jarvis Taxpayers Association. "But Howard Jarvis and others behind the initiative were determined that they were going to control the tax monster."

More than property tax relief

The heated discussions backers of Prop. 13 had when they were putting the initiative together make it clear they were looking for more than property tax relief, said Ted Costa, who runs the People's Advocate, an organization founded by Gann.

"The overwhelming opinion was that the purpose of Prop. 13 was to limit the size of government," he said. "By the month before the election, it was clear that blue-collar voters and homeowners everywhere were using Prop. 13 to send a message to government."

It's a message that even many opponents of the initiative admit was needed.

For decades before 1978, property tax in California was based on a percentage of the assessed value of a home. Every two or three years, the county assessor would look at the sales prices of homes in a neighborhood and set a new and generally higher assessment, which generally meant higher property taxes.

But this low-key process went haywire in the runaway inflation of the 1970s, which sent home prices - and assessments - soaring. Homeowners paying $500 a year in property taxes in 1972 found themselves looking at a $2,000 tax bill in 1978. Between 1974 and 1978, the average value of a California home jumped from $34,000 to $85,000, and property taxes rose with it.

Homeowners, many of them seniors on fixed incomes, couldn't come up with the cash for their dramatically higher property tax bills and faced the terrifying prospect of losing the houses they had lived in for decades.

In one of the great grassroots political efforts in California history, Jarvis and Gann, joined by an army of angry and anxious homeowners, collected more than twice as many signatures as needed to get the initiative on the ballot. On election day, Prop. 13 passed with 65 percent of the vote.

But those angry voters didn't just celebrate and go home. After tasting the political power of ballot-box democracy, they quickly went back for more.

A year later, Gann wrote an initiative to limit government spending that passed with 74 percent of the vote. In 1982, Proposition 7, which prevented state income tax from rising with inflation, passed. Proposition 218, a 1996 initiative, required a public vote on many local assessment increases.

Tightening the screws

Each new measure tightened the screws on state and local government, either limiting revenues or making it tougher to raise money through taxes.

"Because of Prop. 13, taxpayers felt they needed to be in control because government wasn't giving them a fair shake," said Teresa Casazza, president of the nonpartisan California Taxpayers Association. "Taxpayers have a real skeptical view of how the government is taking care of the money it's receiving."

Requiring a two-thirds vote for any type of statewide tax increase has tied the Legislature in knots because Republicans, who make up more than a third of both the Assembly and the state Senate, have adamantly opposed any tax hikes.

California voters don't see the restrictions as a bad thing. In a Field Poll released today, 72 percent of those surveyed disapproved of changing Prop. 13 to allow the Legislature to raise taxes by a simple majority vote. When they were reminded that the state faces a multibillion-dollar deficit, the numbers barely moved.

"The huge deficit and state debt don't make a difference," said Mark DiCamillo, director of the poll. "Voters want to set a fairly high bar for increases in taxes and want to see bipartisan support."

Bureaucrats unhappy

Complaints about Prop. 13 come mainly from government officials and bureaucrats unhappy with the way the initiative transferred the power of the purse to the people paying taxes, said Fox, who worked closely with Jarvis.

"What was revolutionary is that under Prop. 13, certainty goes to the taxpayer," he said. "Before 1978, the certainty belonged to the tax collector."

Reagan, both as governor of California and as president, took the view that government was more the problem than the solution. But with the passage of Prop. 13, conservative voters saw a solution, a way to shrink government by starving it of revenue.

Costa, who took over People's Advocate after Gann died in 1989, has involved the organization not only in tax battles but also in ballot fights on such issues as term limits, victim's rights, legislative reform and the 2003 recall of Gov. Gray Davis. He's talking about a ballot initiative that would define taxes to include several of the government charges and fees that don't now fall under Prop. 13's rules.

"We want to reduce the size of government," he said. "Our ballot measures don't say it in so many words, but that's understood to be on the top of any initiative we put out."