The MacNeil/Lehrer Report; Jarvis Amendment: Property Tax Revolt?

ROBERT MacNEIL: Good evening from Los Angeles. Next Tuesday is Election Day here in California, and on present indications angry voters appear ready to put a shotgun to the heads of state and local government. On Tuesday`s ballot is Proposition 13, mandating a mammoth rollback in property taxes and drastically curbing government`s ability to raise taxes in the future. If it passes -- and the latest polls indicate that it may -- Proposition 13 could turn the long talked-of taxpayers` revolt into a national political reality. Imitative movements have already sprung up in many other states. So the country will be watching California with unusual intensity next week.

Proposition 13, known as the Jarvis Amendment, has produced the most emotional and fiercely fought issue in decades of weird ballot initiatives Each side has spent more than a million dollars on the media struggle. Here are two examples:

(Pro 13 Commercial.)

SPEAKER: Each year California politicians go on expensive junkets all over the world, stay in the best hotels, and hand taxpayers the bills. Your yes vote on Proposition 13 will force an end to this kind of wasteful government spending. But, if you`d rather send a politician to Paris, vote no.

ANNOUNCER: Cut property taxes two thirds. Show the politicians who`s boss. Vote yes on Proposition 13.

(Anti 13 Commercial.)

U.S. Senator ALAN CRANSTON: California voters will soon choose between two property tax limitation measures, Propositions 8 and 13. 13 will slash local services like fire and police protection and schools, but there are hidden costs. Californians will lose almost two billion dollars in federal and state income tax deductions, and will lose another two billion in federal matching funds for education, health and crime protection. I`m for 8 because it gives real property tax relief and puts a lid on local government spending. I urge you to vote yes on 8 and no on 13.

MacNEIL: The almost volcanic eruption of voter resentment caused by the Jarvis Amendment panicked the state legislature into producing an alternative called Proposition 8, that Senator Cranston just referred to. But it`s so complicated that opponents of Jarvis have found it much easier to sell the idea of chaos in government if Jarvis passes. They say the fifty-seven-percent cut in property taxes it would produce would mean a loss of seven billion dollars in revenue, throwing thousands of government employees out of work and cripping services. The Los Angeles coroner says dead bodies would have to wait up to twenty-four hours for collection, and similar doomsday scenarios have been produced for hospitals, sanitation, fire and police.

Passage of the Jarvis Amendment was uncertain, when the Los Angeles City suddenly announced new property assessments literally doubling many homeowners` taxes. The furor that caused gave Jarvis the push that now makes it likely to pass. Governor Brown, who fought Proposition 13, now seems resigned to its passage, and yesterday promised state funds to rescue schools and other services. To trace how this issue grew into the hottest political potato in years, here`s a report by William L. Rukeyser of California Public Television`s Capital News Bureau in Sacramento.

WILLIAM L. RUKEYSER: Everyone in California has a story about the house down the street that used to cost thirty, but just sold for $90,000. It`s been five years of incredible housing inflation. Right behind the speculator has come the county, doubling assessments overnight in some places. For local politicians, this housing inflation meant a painless way to raise taxes. Well, when your property tax goes up, you feel it. It isn`t like income taxes taken out of your paycheck, or sales taxes paid in small amounts. For years middle-class homeowners waited for substantial property tax relief from Sacramento. It didn`t come, and now they`re forcing the issue.

Elaine Sullivan bought this house in Marin County almost five years ago. During that time her taxes have gone up twice, each time by almost one third. For her, as for many other Californians this year, property tax is a very emotional issue.

ELAINE SULLIVAN, Terra Linda Homeowner: If every two years there is an increase of thirty percent, in ten years it`ll take half of my yearly in come just to pay the property taxes.

RUKEYSER: If Proposition 13 is defeated, do you think that the time might come when you would be forced to move?

SULLIVAN: Oh, I`m sure of it.

RUKEYSER: Mrs. Sullivan sees the Jarvis-Gann initiative as a guarantee she can stay in her home, and she`s working for its passage. She not only signed the petition but got many others to sign. She goes to meetings like this one featuring Paul Gann, one of the co-authors of the proposition.

PAUL GANN, Co-Author, Proposition 13: I`m to compliment all of the volunteers throughout this state that worked very hard, gave of their own time and paid their own expenses; and for that we`ll always be grateful. It was a great deal -- it was satisfying to win that fight. It was also very satisfying to have filed signatures in all fifty-eight counties for the first time.

RUKEYSER: More than a million people around the state were concerned, enough to sign. And Gann was able to mobilize them, linking his efforts to those of Howard Jarvis, who had tried to qualify tax-limiting initiatives for years. Jarvis is the director of a Los Angeles apartment house owners association. This time around he struck pay dirt, hitting a responsive chord among frustrated voters.

HOWARD JARVIS, Co-Author, Proposition 13: We`re going to put a chain around the legislators` neck that they can only raise the market value two percent a year, and we`re going to put another chain around their neck that it takes a two-thirds vote of both houses to raise any other taxes.

RUKEYSER: Proposition 13, the Jarvis-Gann initiative, is a proposed amendment to the state constitution. Simply put, the measure reduces property taxes and makes it harder to increase others. It lowers to one percent of cash value the property tax paid on any home or business property in the state.

The Jarvis-Gann initiative rolls back assessments to the 1975-76 levels for taxing purposes. Buildings would be reassessed when they changed owners or had new construction. No new property taxes could be passed if the Jarvis- Gann initiative goes into effect. The state could raise other taxes by a two-thirds vote of the legislature. Local government could do the same by a two-thirds vote of the electorate.

Who`s going to be affected if the amendment passes? Local governments will lose a lot of money, possibly seven billion dollars a year. A large portion of that would have been paid by businesses and property taxes, but that savings may be a two-edged sword. Some big businesses, like the Bank of America, are afraid they will be the targets of other taxes later on. Who else would be affected? A lot has been said in this campaign about apartment houses, because Howard Jarvis represents that industry. He says owners would pass on tax savings in the form of lowered rents. In Alameda we asked an owner and a renter what the owners will do if Jarvis Gann passes. First, the owner:

CAROLINE HOOTEN, Alameda Apartment House Owner: I think possibly they wouldn`t be inclined to put the rents up so quickly, but I feel that a lot of them, possibly, will take the money and will improve the property to make it much more attractive for the tenants.

TOM JONES, Alameda Renter: I don`t feel that I would get a cutback in rent, and I`m not even sure whether a lot of the property owners would take the money and improve the property with it. There are a few that probably would, but I don`t think all of them would.

RUKEYSER: Obviously local government will lose money under Jarvis-Gann. But when property tax payments decrease, so does the deduction that most property owners claim. And if your deductions go down, your income tax goes up. So the state and federal government will get more money.

Dr. Richard Musgrave of Harvard is a public finance expert. He`s a visiting professor this year at the University of California.

Dr. RICHARD MUSGRAVE, Professor of Political Economics, UC Berkeley: I think without any doubt the proposal, if it went into effect, would mean a shift from local taxes to state taxes -- that is to say, from property tax to sales, income, corporation income taxes -- and I think it would also mean a shift towards greater state control. It`s kind of ironic that the group of public opinion which seems to support the Jarvis proposal would come forward with something which will result in a high degree of increased centralization, whereas you would think that they would want the opposite, that they would want grassroot democracy and less of the big bad central bureaucrat.

RUKEYSER: Nobel Prize-winning economist Milton Friedman has already lent his name and prestige to the Jarvis campaign.

Dr. MILTON FRIEDMAN, Professor of Economics, Stanford: I doubt that there is any citizen in California who thinks he`s getting his money`s worth for the more than forty percent of his income which is being spent for him by federal, state and local governments all combined. How did it get that way? Because we make it too easy to pass the taxes, and too easy to pass expenditure programs. And therefore, I think it is highly desirable to have a system under which it requires more than a simple majority in order to get higher taxes. In fact, my major criticism of Jarvis-Gann is that it does not go far enough.

RUKEYSER: Lisa Rubens, a Laney College historian, has studied the initiative process in California and its use as a tool for voter protest.

LISA RUBENS, Instructor of History, Laney College: I think to a certain extent that it could be considered a tax payers` revolt. There certainly are other means by which taxpayers can, literally, revolt: they can not pay their taxes. But I think this can be seen as a legal means by which taxpayers are saying they are fed up and they will no longer participate in or support government through this tax. It`s ironic that the Jarvis-Gann initiative in many ways is a protest against large government or a plethora of public services. And what`s ironic is that the first use of the initiative in California was in 1904 in the City of Alameda, whereby voters initiated a tax that would support a public library. And here was a case of voters feeling that there were no public services and that they would have to initiate legislation to achieve them.

RUKEYSER: When June 6, Election Day, arrives, Jarvis Gann will not be the only property tax measure on the ballot. Voters must also consider Proposition 8. When Jarvis-Gann qualified for the ballot, the legislature was forced to come up with a property tax reform of its own. The passage of Proposition 8 would allow that law to go into effect. The legislature`s tax reform bill will affect only owner-occupied homes and doubles the tax credit for the forty-five percent of the state`s population who rent. If both propositions pass, 13 will be the winner even if 8 gets more votes. If both are defeated, it`s back to the drawing boards in Sacramento.

LINDA PARTH, Los Angeles Teacher: My husband, who is also a teacher, and I have very mixed feelings about this, because on one hand we`re homeowners and we would like to see property taxes reduced, and on the other hand, we may be losing our jobs, which we would need in order to pay even reduced property taxes.

JAMES PRICE, Pasadena Homeowner: I can`t say yes or no, and I talk about ridding myself of prejudices; I mean those which have been building up and up for many, many years. In the past, when...

RUKEYSER: Against whom?

PRICE: Against government officials, elected officials, the legislature especially, rather than government officials in common, because I think that there has been plenty of time for some relief to have been granted. Right after the Proposition 13 came along, there was all haste put on, full steam ahead in order to get some kind of a tax relief bill. And it went over. I don`t know why something couldn`t have been done a long time ago.

MacNEIL: The popularity of Proposition 13 has made not only a state, but something of a national, hero out of its author, Howard Jarvis, a seventy- five-year-old former newspaper publisher who has been trying to get something like this going for fifteen years. Jarvis has received messages of inquiry and support from thirty-three other states across the nation and several foreign countries, some indication that he`s touched a responsive chord of citizen resentment, not only against high taxes but perhaps against government itself.

Mr. Jarvis, what`s your principal motive -- simply to get taxes down, or to slap down government?

HOWARD JARVIS: Well, I think the principal motive for 13 is to enable elderly people to stay in their homes in California, some three million, and if we don`t do it they`ll be losing them; the second is to take a tax squeeze off the middle class, the man and his wife and two kids, who are living in serious insecurity because of an extortionate tax system; and third, to make it again possible, I think, for young people to buy a home in California, which they can`t do now. Now, these are the basic things that we`re trying to accomplish, and we think all of them and each of them are more important by itself than any function that government has, no matter what it is.

MacNEIL: But the underlying message, is it that government is too big, too wasteful, too inefficient, too much?

JARVIS: The underlying thing is -- and I think Milton Friedman spelled it out very well -- that government has so much money that it doesn`t have to establish any priorities for anything. And Mr. Fried man thinks that this will require the public officials of the State of California to begin to attach and look at some priorities of which money should be spent and which should not be spent. And he said what we need is a budget instead of a blank check. And we have been giving governments blank checks for a long time.

MacNEIL: Now the estimates are that if your amendment passes that it could result in revenue losses of up to seven billion dollars. Could there be that much fat or waste in government?

JARVIS: In the first place, that figure is wrong. Governor Brown said yesterday morning what I have been saying for some time, that the use of the seven-billion-dollar figure was greatly exaggerated; he said yesterday in his conference it was four and a half billion dollars.

MacNEIL: Well, even so, that`s a huge amount, isn`t it?

JARVIS: Well, it`s not a huge amount considering the amount of money that the California government collects. If you take a million dollars away from a fellow that`s got thirty more, he`s not in bankruptcy. And this is what we`re talking about.

MacNEIL: Well, do you believe that all that amount, if four and a half billion is the correct amount, represents unnecessary expenditure, waste, inefficiency?

JARVIS: Yes, and a good deal more than that. We should reduce it far more than we are.

MacNEIL: You`ve heard the prediction, obviously, in this report that your amendment would in effect result in much greater central power in state government, taking local control away. Does that concern you at all?

JARVIS: No, it doesn`t me because it isn`t true. For ten years the League of California Cities, the state boards of Association of Supervisors have testified before the Senate Revenue and Tax Committee, the Senate Finance Committee that ninety-six percent of all of their costs are mandated by either the federal or the state government. Now, these are their words, not mine, and their words also are that they have robbed local government of the power that it should have now.

MacNEIL: They`ve already robbed it, you mean.

JARVIS: That`s right; it`s not there, and so the conversation about it is immaterial. Now, what I tried to do with the amendment is to help that somewhat by having a clause in the amendment that the counties collect the money and distribute it to the various taxing districts within the county according to law. The argument against it is there`s no such law. My answer to that is there could be one in twenty minutes. And at least it would be written into the constitution that the local government has the money in its hand and unless they wanted it to the state couldn`t get it away from them. I`m not so sure that that will do what we hoped for, but that was the intent because it`s obvious from their testimony, not mine, that local government has just about disappeared already.

MacNEIL: Okay; we`ll come back. The Jarvis Amendment has many opponents, and his debates with them have become a nightly television spectacle in California. One of those leading the fight in the populous southern half of the state is Howard Miller, president of the Los Angeles School Board and familiar to Public Television viewers as one of the former attorneys on the program, "The Advocates."

Mr. Miller, does the opposition to the Jarvis Amendment agree that property taxes are too high?

HOWARD MILLER: Of course, and the major objection to Proposition 13 is that it is not addressed primarily to homeowners. Two thirds of its total tax relief goes to the owners of commercial and industrial property. Of the seven billion dollars that would be cut, four and a half billion go not to homeowners but to the owners of commercial and industrial property. In effect, Proposition 13 manipulates my anger at the fact that my taxes have tripled in four years and the anger of millions of others to give primary tax relief to commercial property owners. And it`s that loss of the four and a half billion dollars that causes the trouble. Proposition 8, on the other hand, in the Behr bill, is addressed solely to homeowners; it gives all its relief to homeowners.

MacNEIL: But would you in the opposition to Jarvis concede that it took Mr. Jarvis and his amendment to galvanize the state legislature into some real action on homeowner...

MILLER: It did take Mr. Jarvis and his amendment, and the best way to reply to that and to thank those who put 13 on the ballot is to realize it`s primarily a commercial property owners` initiative and to vote instead for Proposition 8, which gives relief where it is needed: to homeowners and renters. Sure it took 13 to galvanize the legislature, but they did act, and they did provide the relief for...

MacNEIL: So to that extent, in your view, it`s been a healthy development.

MILLER: It is not as healthy as otherwise could have been, but it`s resulted in 8, which is better than 13.

MacNEIL: It is said that one seventh of California`s work force is employed by government at one level or another. Have Californians been getting more government than they really need or are willing to pay for?

MILLER: Well, we may find out if this passes. But let`s look...

MacNEIL: That would be an affirmation that yes, it`s been too much government.

MILLER: No, I don`t think so. Let`s look at what`s going to happen. We`re talking about -- let`s take the four and a half billion dollars that goes to the commercial property owners. That essentially will result in employees being laid off. Eighty percent of all government are salaries of employees. In effect what a Proposition like 13 does, under the guise of holding down the cost of government, is to take four and a half billion dollars of wealth and transfer it from those who work for a living -- it`s true, they work for the government -- transfer it from salaries of those who work for a living to those who own property, commercial property. Now, there are better ways to do it ...

MacNEIL: And residential property.

MILLER: No; no, because the residential can be handled easily; it`s the four and a half billion additional that causes the problem. Now, you see, that`s really the transfer of wealth from salary to property. There are other ways to do it; for example, the legislature`s alternative, Proposition 8 in the Behr bill, imposes a limit on state spending, imposes a limit on local spending, which will have the same effect of cutting back in the future on government. But you don`t do this by going in and suddenly lopping off. The UCLA Graduate School of Management estimates an additional unemployment in California of 450,000 jobs if this passes.

MacNEIL: Let`s look at the specifics of your jurisdiction. You, I understand, have been drawing up, like many other officials, alternate budgets for the LA school district. What services in your jurisdiction would be lost if Jarvis passes? Is it chaos, is it doomsday, as the opposition`s been saying?

MILLER: Well, let`s look at the facts and decide whether it`s doomsday. Seventy-five percent -- seventy-four percent, to be exact -- of our regular operating budget comes from the property tax. If Proposition 13 passes, that seventy-five percent, the day it passes, is lost. What does that mean to us? How do you run a district? If someone carne to your family and said, "On July first you`re going to lose seventy-five percent of your income," what would your response be? That`s not fat; that`s right through to the marrow.

MacNEIL: So how will the children in Los Angeles actually suffer?

MILLER: We will have to, and have said we will have to, cancel the summer school, adult programs, vocational programs, interscholastic athletics, and then do more. Students will go to school only the legally required amount of four hours a day, with schools on double session, schools without nurses or counselors, and student-teacher ratios of fifty and sixty and seventy to one. Now, that`s reality, and I don`t think you have a functioning school district when that happens. And one of the indications and consequences that that surely will happen is `that our board of education unanimously has already voted. to send notices of termination to 20,000 of our 30,000 teachers, indicating they will not be employed if this passes.

MacNEIL: Let`s put that to Mr. Jarvis. You`ve said, Mr. Jarvis, that chaos will not occur. Won`t there have to be layoffs of teachers and firemen and policemen if this goes through?

JARVIS: No, there will not, and I would like to say that Mr. Miller keeps using that seven billion figure, which is a false figure, as per the Governor, of yesterday. No, the answer to that is no, because the state constitution requires the state legislature to finance the schools in the amount that the district boards decide, so this amendment is not going to affect the schools five cents. The legislat...

MacNEIL: What about the notices that he has just talked about to go to 20,000 teachers?

JARVIS: He said what they were, let me tell you what they are. They were not dismissal notices at all. They were notices that were gotten into the system by the teachers` union that requires the school board under law to send these notices out every year. The notice does not say you are fired; it says you may or may not be rehired. And only this year they use it as a gigantic scare tactic having to do with the amendment, when it was totally immaterial to the amendment.

MacNEIL: Have you been using scare tactics as a device in this?

MILLER: Well, I think it`s now real. You know, the Governor met with local and school and city officials yesterday; the Governor said there will be no new taxes, there will be no replacement revenue; out of the seven-billion- dollar loss there will be the net loss of four and a half billion dollars, exactly the amount...

JARVIS: He didn`t say that.

MILLER: ...that`s going to commercial property owners...

JARVIS: Never said that at all.

MILLER: He said it, it`s reported, it clear that`s the loss. Now, how can you believe...

JARVIS: You read the paper yesterday.

MacNEIL: Let Mr. Miller have his turn.

MILLER: How can you believe that someone can come along and say, "I`m going to reduce taxes by seven billion dollars with a net loss, but no one will be hurt"? There is no guarantee in the California state constitution -- and this has been conclusively shown; the only guarantee in the California constitution is that the state must provide $120 per year for each student in the...

MacNEIL: Is it your position, Mr. Jarvis, that no one...

JARVIS: Those statements are totally false from beginning to end. Now, go ahead.

MacNEIL: Are you claiming...`

MILLER: I could put on the record the same thing about Mr. Jarvis, and we can go on from there.

JARVIS: Well, you put it on the record, and then the record will show the statement, but seven billion is false and the constitution you`re saying is false; the amount you said we`re going to lose in federal matching funds is false, because California pays two dollars for every dollar they get back...

MacNEIL: Well, we can`t settle these facts here, but let me put this to you: two thirds majorities, which are what you require in the state legislature, both houses, to raise taxes, and by local electorates for future increases.

JARVIS: That`s right.

MacNEIL: They have traditionally in this country been reserved for the most fundamental constitutional issues of principle. Are you not subjecting the basic lubricant of government, taxation, to a tyranny of the minority -- in other words, a sort of undemocratic principle, by making them liable to a two-thirds vote?

JARVIS: No. There is no basis for that at all. For many years the legislature here has had a fifty percent-plus-one vote to raise taxes and two thirds to lower them. That`s well established. And what we want to do is make this even. Now, the two thirds precedent is very well established in American government; it takes two thirds of the assembly and the senate to override the governor, it takes two thirds of the Congress and the Senate to override the President, and it takes three fourths of the states to change the Constitution. Now, there`s two things: this is not a democratic majority kind of a government at all. This is the Republic of the United States, and this is a basis to protect a vast majority of the population so that the majority, by one vote, can`t wipe out the minority. Now, we have a situation in California, if they want to have $100 million bond issue, say it`s a hundred voters; seventy stay home, thirty vote, sixteen vote yes and fourteen vote no; and those two votes put this debt on all the rest. Now, that`s the worst kind of a minority control I`ve ever seen in government. We`re going to wipe it out.

MacNEIL: What does your side say to that? Is this essentially undemocratic? Could government operate with the two thirds requirement?

MILLER: Well, first of all, no property taxes of any kind can be placed; it requires a two thirds vote of the qualified electors, and nobody knows what that means, in order to impose any additional taxes. But let me say, and I must say, Robert, about some of the statements that have been made here that Mr. Jarvis made some of these same statements in an official ballot argument that was sent in to the State of California. A lawsuit was brought against him by Wilson Riles, the state superintendent of public instruction, about some of these statements he`s made about education. The Superior Court of Sacramento County ordered some of Mr. Jarvis` statements stricken from that ballot because they were so false that under California law they could not appear in the ballot argument.

MacNEIL: We have just...

JARVIS: I want to say that the judge didn`t say they were false...

MILLER: And I really want equal time on this at this point, Robert, I really...

JARVIS: The judge in the decision...

MILLER: I really, I was assured of equal time, that you would be in control...

JARVIS:... in the decision the judge said...

MILLER:... of this kind of tactic, and I`m simply going to keep talking...lie.

JARVIS:... in the decision that...

MILLER: ...because...

MacNEIL: I`d like to ask you both to stop talking for a moment...

JARVIS:I don`t want my ...

MacNEIL: I haven`t got a whistle, but I`m about to blow it.

JARVIS: I don`t want my decision to be lied about.

MacNEIL: Okay.

JARVIS: The judge says it was perhaps misleading.

MacNEIL: All right. I would like a quick...

MILLER: The judge said it was misleading and perhaps a deliberate

MacNEIL: We have a minute left, and I would like...

JARVIS: That`s a lie. He didn`t say that.

MacNEIL: I would like a quick answer on this, with thirty seconds each: is this unique to California, or is it part of a national conservative revolt against high taxes in government?

MILLER:I think what is unique to California and what this is a protest against is the particular assessment mechanism that has permitted assessments on individual houses to skyrocket, as we saw in the film. That in fact is dealt with under Proposition 8 in the Behr bill. What will be truly unique to California is a proposition that, under the guise of homeowner property tax relief, transfers four and a half billion dollars to apartment house owners and other commercial property owners, whom Mr. Jarvis represents.

MacNEIL: Is this unique to California?

JARVIS: No, it isn`t unique to California at all, it`s an American system to keep the government from stealing all the money from the people.

MacNEIL: I have to stop you there; that`s the end of our time.

JARVIS: Well, that`s good enough.

MacNEIL: We`ll watch very interestedly on Tuesday to see what happens. That`s all from Los Angeles tonight. We`ll be back tomorrow night. I`m Robert MacNeil. Good night.