The Great Tax Rebellion, round two

...Prominent economic analysts now project that California will have a five-year growth rate above the national average...

...In the presence of the new crop of amendments the nation's tax structure is in a surprisingly plastic stage...

...Part of the problem of high property taxes in California and in other states (e.g., New York) is that the property tax has been used as a major revenue source for not only schools, police and fire protection, but for welfare, medicare and medicaid expenses as well...

...There can be little doubt that many California voters were hoping that the passage of Proposition 13 would produce major cutbacks in welfare services...

...DO SUCH shifts necessarily entail a decline in welfare and health services to the poor as some commentators have suggested...

...Mayor Thomas Bradley of Los Angeles had proposed layoffs for over 1,000 city police...

...But what about a longer view...

...In the past three years an annual federal deficit of over $50 billion has been the locomotive pulling U.S...

...Since the offspring of Proposition 13 generally resemble their parent by being tax shifters rather than tax reducers there is every reason to believe that most of the states acting in round two of the great tax rebellion can follow the California pattern...

...While turning down a California-like cut in property taxes the Michigan voters decided to tie future spending by the state to a fixed percentage of income...

...2.) And in what other state was there a $6.6 billion surplus in state funds conveniently waiting to balance a $7.0 billion cut in property taxes...

...Many of the most enthusiastic supporters of Proposition 13 are obviously enthralled with the idea that the newly mandated lids on taxes will turn the nation's tax policy back to its earlier orientation toward economic growth and capital formation...

...A somewhat different route to tax control could be followed by states imitating Tennessee where this spring the voters by a two to one margin limited future increases in state spending to the percentage gain in personal income within the state...

...But what if each year the available federal expenditures were constitutionally limited to taxes raised in that particular year...

...Proposition 13 and its subsequent cloning in various states can be interpreted as a backlash to the tax structure and the tax orientation in state and local governments...

...1975...

...Arid at the end of each fiscal year the inevitable cost overruns and unanticipated military requirements can be paid by the invisible money of an expanded federal deficit...

...In Michigan an amendment to severely cut property taxes was rejected...

...In southern California the median price of a one-family home had been $43,000 in mid JOSEPH ODONOGHUE./ormer/y of the Archdiocese of Washington, is Speaker of the Faculty at Hofstra University...

...Only in California, it was argued, could there have been the combination of stupid local politicians cheerfully accepting unprecedented increases in local taxes and stupid state politicians accumulating a state tax surplus greater than the tax surplus of all other states combined...

...In overwhelmingly voting to reduce their local property taxes the California voters were fully aware that their state government was endowed with the necessary funds to handle a much larger share of local expenses...

...As in the case of most major socio-economic changes the early witnesses to the process are not fully aware of its potential...

...A similar shift in the financing of local expenses to state governments can be expected to gain momentum since 44 of the states are currently reporting budget surpluses...

...No police or firemen were fired, nor were essential services significantly curtailed...

...The entire nation would then enter a totally unprecedented era of resource allocation...

...The worst health programs in the nation have been identified with tight-fisted county governments where a "let the poor go elsewhere" attitude was shielded from any effective pressure toward change...

...What is overlooked in that form of analysis is that the nation is now confronted with surprisingly easy-to-execute amendments to state constitutions capable of producing rapid and profound changes in the taxing instrument...

...With additional states available as successful models of tax reduction the number of clones of Proposition 13 on state ballots in 1980 could easily double that of 1978...

...military expenditures forward...

...How rapidly it spreads into Commonweal: 780 additional states will in large part be determined by what happens in the 12 states where tax cuts were ratified by voters this November...

...To refer to tax shifts which produce only minimal benefits to most taxpayers as a taxrebellion may be an overstatement.But the newly initiated process of changing taxation direction through popularly supported amendments to constitutions is far more significant than the tax dollars it shifts...

...With that kind of initial momentum, a boost absent in the case of all other amendments, there would be good reason to believe that in a relatively short period thereafter the required three-fourths of the states would individually ratify the amendment...

...The state legislators chose to freeze welfare and health services at tht ir pre-Proposition 13 levels...

...Liberal supporters of such programs were anticipating severe reductions when the state legislature began its deliberations on allocating the surplus revenues needed to bail out local districts after the voters had given their approval of Proposition 13...

...Two-thirds of all school boards have basically the same budget after Proposition 13 as before...

...They might be surprised...

...This second round of rebellion can be expected to resemble the earlier round in that it will also be characterized by a tax shift rather than a tax reduction...

...Will a similar set of circumstances occur in those 12 states where actions similar to Proposition 13 have been officially ratified in a state election...

...The average cut of 10 percent reported by most local governments comes very close to what many bureaucrats had privately admitted to be the available slack in revenue-bloated municipalities...

...The current tax revolt, sometimes billed by its promoters as the second American Revolution, has now been approved in a variety of forms by voters in 12 of the 16 states where it has been tested by ballot...

...Since the dawn of the New Deal era a significant part of the tax power of the U.S...

...In no case do these surpluses approach the size of California's, but their likely reoccurrence provides a major incentive to voters seeking to shift tax loads away from their own community...

...It would be unrealistic to expect that the amendment device will be limited to state usage...

...The post-Proposition 13 shift from local to state financing of these programs could be the triggering device for a nationwide shift to federal funding...

...What ultimately happens could represent a profound change in the nation...

...In the wake of Proposition 13 the state and local governments dismissed perhaps 9,000 employees, or less than 1 percent of their total labor force...

...But with additional states now legally committed to the tax reduction movement it is clear that the taxpayers' revolt is entering a new and greatly expanded arena...

...In the Kennedy-Johnson era the taxing power of the federal government was further tilted toward achieving a form of social justice in job availability and in the allocation of federal resources...

...A staggering 85 percent of the voters in Texas chose to link increases in state spending to the rate of the future growth of the state's economy...

...Any unit, family, institution, or corporation which suddenly comes to the end of debt accumulation has moments of confrontation with reality that can produce a new sense of priorities...

...But in the rest of the nation the voters were endorsing state and local tax reductions by impressive majorities...

...H OW FAR are we away from a constitutionally imposed control which would ban deficit spending...

...Throughout his successful campaign for reelection Governor Jerry Brown cited California as a model for the nation in its relatively painless reduction of tax rates...

...A good case may be made that the prime beneficiary of the federal deficits in seventeen of the last eighteen years has been the defense establishment...

...With an average property tax rate of 3.5 percent and with unavoidable reassessments every three years the average taxpayer in that populous region of California had experienced a ballooning of $ 1,000 or more in property taxes within a mere three years...

...Stopping the locomotive by placing a constitutional lid on federal spending could dramatically change the rules of the war investment games played by both military establishments...

...Each year the Pentagon leadership can submit an expansive fund request with the clear understanding that there is an expandable debt waiting to produce money not otherwise available...

...The leaders of the tax revolt did not score the complete sweep in state elections that many of them had hoped for this November...

...By numbers approaching the two to one majority which Californians gave to Proposition 13 the voters in Massachusetts placed a lid on any future property tax increase...

...By a narrow margin an amendment to limit future spending increases to 5 percent was defeated in Nebraska...

...The latest states to join the movement may not experience the same boom in their private economies as California, but if they centralize tax collection and resource allocation in the state government in the California manner they may also avoid major cuts in local services...

...Major military expenditures such as submarines and aircraft carriers under long-term construction become firmly structured into the tax-supporting system...

...In the presence of that kind of movement the Soviet Union each year has raised its own equivalent in the military area...

...This shift in tax payments occurs when the lower property taxes replace the higher property taxes as a federal income tax deduction...

...1.) In what other state had property value and property taxes risen so precipitously in such a short period...

...As a consequence of this action by the 34 states the Congress would then be required to convene a national assembly for the explicit purpose of, a wide-ranging consideration of amendments to the Constitution...

...Will the spread of Proposition 13 tendencies ultimately effect the U.S...

...But programs initiated on the national level have the potential of growing with the revenue increases 8 December 1978: 781 historically enjoyed by the federal treasury, increases that are not paralleled on state and local levels...

...But in other states such as Ohio a constitutional amendment cutting property taxes would seem to be an inevitability in view of the everincreasing majorities opposing tax increases on local school elections...

...Future increases in welfare payments are now linked to increases in the salaries of public employees...

...Legislation calling for a national convention to amend the constitution has been passed by 23 states...

...Wherever such limitations are imposed there will be strong pressure to shift the financing of health and welfare programs from local to state authority, and a corresponding loss in local power overpublic finances as the state government become the focal point of revenue raising and resource allocation...

...For most taxpayers the remaining 75 percent of supposed tax savings will be wiped out by social security tax increases scheduled to take effect in January and by inflation-fueled rises in personal income into higher tax rate brackets...

...Earlier this year the UCLA Business Forecasting Project had gloomily projected an eventual loss of 451,000 jobs in California if Proposition 13 were adopted...

...tax structure...

...Among the remaining one-third the maximum cuts of 15 percent were experienced by the wealthiest school districts (e.g., Beverly Hills) as a result of the sliding scale of state assistance adopted by the legislature...

...Of course it could be argued that in any situation, viz., a balanced or an unbalanced budget, the military will get its way with the nation's money...

...welfare payments can be raised only if salary increases are gained by civil service employees, an unlikely event in the immediate future...

...Even in the few cases where voters rejected severe tax cuts there were signs of a future movement toward tax reduction...

...DESPITE the overstatement of its actual gains for individuals, however, and despite the popular unawareness of its main beneficiaries, the tax rebellion originating in California has attained national momentum...

...A key factor in getting clones of Proposition 13 on the ballot in these states was the fact that Armageddon did not occur in California in the wake of its tax cuts...

...From analysis of who actually got the $7 billion in tax cuts it is clear that home-owners received only 30 percent of the mandated tax cuts...

...The Great Tax Rebellion, round two JOSEPH O'DONOGHUE WOULD the American Revolution have been approved by three-fourths of the colonies if it had been placed on their respective ballots a few months after the opening contests at Lexington and Concord...

...One likely result would be a new emphasis placed on the SALT negotiations...

...government has been used to promote social equity through progressive tax rates while simultaneously developing a modest redistribution downward of the nation's wealth...

...The euphoria of some California home-owners over both a tax rollback to 1 percent of assessed value and a 2 percent cap on future annual increases did not take into account the transfer of at least 25 percent of their reputed tax reduction to the federal government...

...Voter approval by majorities running as high as three to one has come less than five months after Proposition 13 cut property taxes by 57 percent in California...

...The big winners in California's tax shift were not the recipients of an illusory tax reduction of $600 per average home...

...Advocates of improved services for the poor and the disadvantaged have long recommended a shift in the financing of these services to the federal government with its larger coffers and with its more visible accountability...

...Proposition 8, which would have provided a milder tax cut excluding the corporations, was defeated on the same ballot where the broader Proposition 13 scored an impressive victory...

...Of course there is no advance guarantee that more funds would be forthcoming from federal bureaucrats than from state or local bureaucrats...

...House Speaker Tip O'Neill was recently advised by his staff that 11 more states are likely to pass the same measure by late 1979...

...The final count in Illinois indicated a four to one landslide for an advisory referendum urging the state legislature to place a mandatory ceiling on spending...

...Prior to this nationwide cloning of Proposition 13 there were some analysts who suggested that in California there was a unique tax situation not likely to occur elsewhere...

...The big winners were Southern Pacific ($16 million reduction) , Standard Oil ($ 13 million reduction), Lockheed Aircraft ($9 million reduction), and a host of other major land-holding corporations in California...

...In states like New York, where property taxes are higher than in California, an amendment to the state constitution is a complicated process not likely to be achieved by 1980...

...Three years later it was $70,000...

...The hope is that the absence of the great bail-out would provide a new atmosphere in which the hard choices would be more visible to the nation...

...A pre-election poll in the Los Angeles area indicated that a whopping 69 percent of the populace was in favor of a quick cut in local welfare programs...

...A nation's tax policy can be regarded as both a mirror of its goals and a publicly accepted tool to help achieve those goals...

...School boards and municipal governments had published seniority lists with thousands of names so that there could be no doubt of the extent of the jobs that were supposedly at stake...

...An expanding private sector is expected to absorb the majority of those laid off in a state into which 200,000 people move every year...

...It is worth noting that those state governments which now pay a major portion of local welfare expenses tend to be the strongest lobbyists in efforts to make welfare a national program financed by the federal government...

...Voters in Oregon said no to a clone of Proposition 13 which would have imitated California by rolling back property taxes to near 1 percent of assessed value...

...With post-Proposition 13 success in 12 states in 1978 and with more states expected to join the movement in 1979, it could be expected that a constitutional amendment requiring an annually balanced federal budget would emerge from such an assembly...

...Within this type of framework it is inevitable that many of the nation's major needs are relegated to a "what's left" column, or a "now we can't afford it" column...