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Proposition 13: Unintended Effects and Feasible Reforms

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  • Sexton, Terri A.
  • Sheffrin, Steven M.
  • O’Sullivan, Arthur

Abstract

This paper explores the causes and consequences of Proposition 13, focusing on its effects on horizontal equity among homeowners, household mobility, and the fiscal structure of state and local government. Horizontal inequities arise because a household's property tax liability depends on the purchase price of its property, not the market value. If property values rise over time, a homeowner in a recently purchased dwelling will pay more taxes than a homeowner who purchased an identical dwelling some time earlier. Proposition 13 and its implementing legislation decreased the relative importance of the property tax, transformed the property tax from a local tax into a statewide tax, and was a contributing factor in the decrease in the overall burden of state and local taxes.

Suggested Citation

  • Sexton, Terri A. & Sheffrin, Steven M. & O’Sullivan, Arthur, 1999. "Proposition 13: Unintended Effects and Feasible Reforms," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(1), pages 99-112, March.
    • Handle: RePEc:ntj:journl:v:52:y:1999:i:1:p:99-112
    DOI: 10.1086/NTJ41789379
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    Cited by:

    1. Liu, Shimeng & Yang, Xi, 2020. "Property tax limits and female labor supply: Evidence from the housing boom and bust," Journal of Housing Economics, Elsevier, vol. 50(C).
    2. Ferreira, Fernando, 2010. "You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 661-673, October.
    3. Lars P. Feld & Gebhard Kirchgässner, 2005. "Sustainable Fiscal Policy in a Federal System: Switzerland as an Example," Palgrave Macmillan Books, in: Hanspeter Kriesi & Peter Farago & Martin Kohli & Milad Zarin-Nejadan (ed.), Contemporary Switzerland, chapter 12, pages 281-296, Palgrave Macmillan.
    4. Dronyk-Trosper, Trey, 2017. "Getting what we vote for: A regression discontinuity test of ballot initiative outcomes," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 46-56.
    5. Gabe, Todd & Rubin, Jonathan & Allen, Thomas & Reilly, Catherine, 2004. "Fiscal Effects of a One-Percent Property Tax Cap on Maine Municipalities and the State Government," MPRA Paper 66701, University Library of Munich, Germany.
    6. Ayşe İmrohoroğlu & Kyle Matoba & Şelale Tüzel, 2018. "Proposition 13: An Equilibrium Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(2), pages 24-51, April.
    7. Seth B. Payton, 2012. "The Impact of Property Assessment Standards on Property Tax Burden," Public Finance Review, , vol. 40(5), pages 584-613, September.
    8. Lars P. Feld & Gebhard Kirchgassner, 2006. "On the Effectiveness of Debt Brakes: The Swiss Experience," CREMA Working Paper Series 2006-21, Center for Research in Economics, Management and the Arts (CREMA).
    9. Gebhard Kirchgassner, 2002. "The effects of fiscal institutions on public finance: a survey of the empirical evidence," Chapters, in: Stanley L. Winer & Hirofumi Shibata (ed.), Political Economy and Public Finance, chapter 9, Edward Elgar Publishing.
    10. James Mak, 2016. "Creating Tourism Improvement Districts to Raise Stable Funding for Destination Marketing and Promotion," Working Papers 2016-2, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    11. Emmanouil M. L. Economou & Nicholas C. Kyriazis & Theodore Metaxas, 2017. "Ancient Athenians, Californians and Modern Greeks: A Comparative Analysis of Choice Set Under Direct Democracy Procedures," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 34(1), pages 47-65, April.
    12. John Deskins & William Fox, 2008. "Measuring Behavioral Responses to the Property Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0816, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    13. Bigelow, Daniel P. & Kuethe, Todd H., 2020. "The impact of preferential farmland taxation on local public finances," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304291, Agricultural and Applied Economics Association.

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