jan 1, 1978 - Proposition 13- reduces property taxes in cali

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proposition 13 ; A California measure that reduced property taxes, capped increases for present owners, and required tax measures to have a two-thirds majority in the legislature. Inspired “tax revolts” across the country and defined an enduring conservative issue: low taxes.

The economic downturn pushed already struggling American cities to the brink of fiscal collapse. Middle-class flight to the suburbs continued apace, and the “urban crisis” of the 1960s had now to contend with the “era of limits.” Facing huge price inflation and mounting piles of debt — to finance social services for low-income residents and to replace disappearing tax revenue — nearly every major American city struggled to pay its bills in the 1970s. Even as suburbs prospered around them, central cities staggered toward a reckoning, their problems far outpaced the revenue available to fix them.

New York, with an annual budget in the billions, larger than that of most states, fared the worst. Unable to borrow on the tightening international bond market, the nation’s largest city neared collapse in the summer of 1975; bankruptcy for America’s financial capital was a real possibility. When Mayor Abraham Beame appealed to the federal government for assistance, President Ford refused. “Ford to City: Drop Dead” read the headline in the New York Daily News. Fresh appeals ultimately produced a solution: the federal government would lend New York money, and banks would declare a three-year moratorium on municipal debt. The arrangement saved the city from defaulting, but as a condition of federal assistance Beame was forced to cut city services, freeze wages, and lay off workers. One pessimistic observer declared that “the banks have been saved, and the city has been condemned.”

n the summer of 1975, New York City nearly went bankrupt. When Mayor Abraham Beame appealed to President Gerald Ford for federal assistance, these newspaper headlines captured the chief executive’s response. Though it was ultimately saved from financial ruin, the city’s brush with insolvency symbolized the larger problems facing the nation: economic stagnation, high inflation, and unemployment. Hard times had seemingly spared no one.


Cities struggled in the 1970s for many reasons, but one key was the continued loss of residents and businesses to nearby suburbs. Over the course of the decade, 13 million people (6 percent of the total U.S. population) moved to the suburbs. New suburban shopping centers opened weekly across the country, and other businesses — such as banks, insurance companies, and technology firms — increasingly sought suburban locations. More and more, people lived and worked in suburbs. In the San Francisco Bay area, 75 percent of all daily commutes were suburb-to-suburb, and 78 percent of New York’s suburban residents worked in other suburbs. The “organization man” of the 1950s, who commuted downtown from his suburban home, had been replaced by the engineer, teacher, nurse, student, and carpenter who lived in one suburb and worked in another.



Postwar liberalism had favored generous public investment, but the troubled economy of the 1970s gave rise to the so-called tax revolt, which reversed that momentum. The premier example was California, where inflation had driven up real estate values — and property taxes. The hardest hit were suburban property owners, along with retirees and others on fixed incomes, who suddenly faced unaffordable tax bills. Into this dire situation stepped Howard Jarvis, a former anti–New Dealer and a genius at mobilizing grassroots discontent. In 1978, Jarvis proposed Proposition 13, an initiative that would reduce property taxes, cap future increases for present owners, and require that all tax measures have a two-thirds majority in the legislature. Despite the opposition of virtually the entire state leadership, including politicians from both parties, Californians voted overwhelmingly for the measure.

Proposition 13 hobbled public spending in the nation’s most populous state. Per capita funding of California public schools, once the envy of the nation, plunged from the top tier to the bottom, where it was ahead of only Mississippi. Moreover, Proposition 13’s complicated tax rate formula benefitted well-off homeowners at the expense of poorer citizens, especially those who depended heavily on public services. Proposition 13 inspired similar “tax revolt” initiatives across the country and taught conservatives a winning political issue: low taxes.

From the New Deal to the Great Society, liberalism had overseen a remarkable decline in income inequality. In the 1970s, that trend reversed, and the wealthiest 10 percent of Americans began to pull ahead again. As corporations restructured to boost profits during the 1970s slump, they increasingly laid off high-wage workers, paid remaining employees less, and relocated overseas. Upper-class Americans benefitted, while blue-collar families who had been lifted into the middle class during the postwar boom increasingly lost out. An unmistakable trend was apparent by the end of the 1970s. The U.S. labor market was dividing in two: a vast, low-wage market at the bottom and a much narrower high-wage market at the top, with the middle squeezed smaller and smaller.

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