California · U.S. · Fortune Technology
If California undid its ‘original sin’ and matched Texas on taxing property, it would raise more revenue than the billionaire tax
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California voters will decide on Proposition 40 soon, but looming over the controversial billionaire wealth tax proposal is another state ballot measure from nearly 50 years ago.
Key facts
- Now enter the billionaire tax, which calls for residents worth more than $1 billion to pay a one-time tax equivalent to 5% of their assets
- In 1978, voters approved Proposition 13, which capped property taxes at 1% of assessed value, limited annual hikes to 2%, and allowed reassessments to market value only after sales or substantial
- The original sin underlying California’s tax structure is Prop 13, the 1978 law that rewrote the rules of property ownership,” they wrote in a recent New York Times op-ed
- California voters will decide on Proposition 40 soon, but looming over the controversial billionaire wealth tax proposal is another state ballot measure from nearly 50 years ago
Summary
In 1978, voters approved Proposition 13, which capped property taxes at 1% of assessed value, limited annual hikes to 2%, and allowed reassessments to market value only after sales or substantial renovations. It came amid a wider tax revolt leading up to Ronald Reagan’s election as president and an era of conservative governance in America. California now has the most progressive income-tax structure in the country with a top marginal rate of 13.3%. The top 1% of earners account for up to half of state revenue, though it also means state coffers are volatile and swing on stock market returns.