Twenty-five years ago, California taxpayers rose up against a property tax system that was literally taxing people out of their homes and passed tax-cutting Proposition 13, which was put on the ballot by citizen petitions. Like the “Shot Heard Round the World” that started the American Revolution, the Proposition 13 tax revolt became the first shot fired in what became known as the Reagan Revolution.
Proposition 13 advanced the ideas of lower taxes and less government to weary taxpaying Americans, ideas which Ronald Reagan championed. Ronald Reagan’s experience and instincts told him that high taxes discouraged productivity and hurt the economy. Reagan did not come to his war against high taxes when he was running for president. He had a long record of opposing taxes. Even his family members heard about his feelings toward taxes in a most personal way.
Son Michael Reagan told a story of asking his father for an increase in his allowance. Father Ron said he would gladly give his son an increase in his allowance — as soon as the government stopped taking so much money out of his paycheck.
Reagan actually tried the tax-increase path in the early years of his California governorship. Back then, he had to deal with the deficit left him by his predecessor, Pat Brown. But the decision to raise taxes brought Reagan grief — although it also gave him great insight.
In 1968, at the opening day game for California’s newest major-league baseball team, the Oakland A’s, the fans were in a festive mood — that is, until the dignitary was announced to throw out the ceremonial first pitch. Gov. Ronald Reagan was greeted with lusty boos timed by one reporter as lasting three minutes. After tossing out the pitch, Reagan commented, “I can certainly hear a helluva lot of you paid your taxes.”
With the tax spigot turned on, Reagan, himself, could not turn it off. His measure on the special election 1973 ballot to limit taxes and spending, Proposition 1, was defeated. Tax revenue continued pouring into the state treasury after the budget crisis was past. In fact, for the five years between the defeat of the Reagan initiative to Proposition 13′s tax revolt in 1978, tax revenue was coming in so fast, government could not spend it all. This led to what California Treasurer Jesse Unruh would refer to as an “obscene” surplus revealed in the waning days of the Proposition 13 campaign. The state surplus was equivalent to about 40 percent of the state’s budget.
When California voters overcame a determined campaign to preserve the high-tax status quo — put on by government officials, big business, public employee unions, and politicians of every stripe — and overwhelmingly passed Proposition 13 in 1978, Reagan felt it reaffirmed what he wanted to do about cutting taxes on the federal level.
“The idea of Reagan cutting taxes was now politically viable and rolling,” said Martin Anderson, the Hoover Institution economist who wrote Reagan’s “Policy Memorandum No. 1″ for the 1980 campaign (it dealt with the economy and tax cuts). “Proposition 13 was a clear political signal that the public was fed up with taxes.”
Anderson said the vote on Proposition 13 was an important political event in the nation’s biggest state, and was readily built into the campaign. “The idea of cutting taxes was no longer a theory. A referendum on cutting taxes had been put before the people and they supported it overwhelmingly.”
Finished with his second term as governor, Ronald Reagan set his sights on the White House. Taxes and spending would be one of the most important planks of the platform he would offer the American people. He often used taxes as a subject for his newspaper columns and for his influential syndicated-radio commentaries in which he continued to tell the American people what he thought — indeed, what he was all about.
Reagan believed that tax reform did not mean creating a more progressive tax system. Rather it meant making big, across-the-board tax cuts to stimulate the economy — just as Proposition 13 had done. In a March 1978 newspaper column, Reagan argued, “In Washington and many state capitols when the words are stripped away, ‘tax reform’ usually boils down to a little cut here, a little added there. The underlying assumption is that the cost of government can never go down, only up.”
Reagan had embraced the work of economist Arthur Laffer by arguing (in a 1977 radio commentary) that, “government can increase its tax revenues and create the jobs we need without inflation by lowering the tax rates for business and individuals. We’ve tried spending our way to prosperity for four decades and it hasn’t worked. If it did New York City would be the most prosperous spot on earth. Twice in this century, in the 1920s and in the early ’60s we cut taxes substantially and the benefit to the economy was substantial and immediate.”
Reagan’s attitude toward taxes since leaving the governor’s office put him in a comfortable position to support the growing property-tax revolt in his home state. Like many of his fellow Californians, property taxes were never popular with Ronald Reagan. More than once in his radio commentaries, Reagan quoted from polls showing the unpopularity of the property tax among the people.
When the battle over Proposition 13 was joined, Ronald Reagan was ready to defend the tax cut in both his radio program and his newspaper column.
In a radio broadcast on February 20, 1978, Reagan told his listeners, “If you live in California you know by now that the sky is scheduled to fall on June 6. … Who do we have to thank for these timely warnings? None other than the good folks who brought you record-breaking public budgets, burgeoning bureaucracies and ever-higher taxes.”
Later in that commentary, Reagan said, “Howard Jarvis, a 75-year old veteran battler of high taxes stunned the spenders in Sacramento when his petition drive netted more than 1.2 million signatures — an all time record.”
Howard Jarvis had been battling taxes for decades. Four times he tried to qualify a property-tax reduction plan for the California ballot and four times he failed, getting closer to the necessary number of signatures he needed to achieve his goal each time. Jarvis was a former owner of small newspapers turned manufacturer who had been active in Republican politics from the 1920s. Howard Jarvis had known Ronald Reagan for a long time. Jarvis had campaigned for Reagan’s tax-reform measure, Proposition 1, and had spoken on Reagan’s behalf when he ran for governor of California in 1966 and 1970.
Jarvis’s perseverance kept him in the tax fight until the timing was right. Like many of the overnight sensations in his adopted hometown of Hollywood, he had toiled for years before suddenly being found by the national spotlight. Jarvis pushed forward his campaign to end what he called “confiscatory taxation” after watching a woman succumb to a heart attack when she realized her high taxes could cost her the family home. “While death and taxes may be inevitable,” Jarvis declared, “being taxed to death is not inevitable!”
With property assessments continuing a steep climb across California, and property taxes jumping as much as 50 percent to 100 percent in one year, Jarvis had no trouble getting voters to sign his petitions. Along with Proposition 13 co-author Paul Gann, Jarvis filed more than twice the number of signatures needed to qualify the measure for the ballot. For the first time signatures on petitions were collected in each of California’s 58 counties. One of those signatures that put Proposition 13 on the ballot belonged to Ronald Reagan.
The former governor not only defended the initiative against outlandish attacks, he went on the offensive arguing the benefits of Proposition 13. In a speech before the Independent Petroleum Association of America in San Francisco two weeks before the election, Reagan said, Proposition 13 would “not only be beneficial to the business climate, but also to the people of California.” He labeled as “scare talk” that the proposition would cripple schools and municipal services.
A few days later (May 28, 1978) Bob Schmidt noted the similar approaches of Ronald Reagan and Howard Jarvis in a Long Beach Press-Telegram column: “Jarvis’ contention about government greed and profligate spending is shared by other people, including Ronald Reagan. Reagan, when he was governor, used to say government budgeting should be like family budgeting. There is a finite amount of money, and spending should be confined to that amount.”
Reagan’s commitment to the Proposition 13 tax cut was on full display when he agreed to voice a radio commercial for the measure. Reagan defended home ownership as being a big part of the American Dream. He said the dream could be lost to the elderly or renters or many others because of high property taxes. Reagan concluded the spot with the words: “Vote Yes on Proposition 13 — for the American Dream.”
Fourteen years later, when Reagan addressed a meeting of the Howard Jarvis Taxpayers Association, he again displayed the essence of his philosophy when it came to tax cutting — it was not merely about saving money: “As we pass along our hard earned freedoms to each new generation, we must also pass along the will to fight to preserve them. When you and your fellow Californians passed Proposition 13 in 1978 you struck a powerful blow for freedom.”
Proposition 13’s victory was the green light Reagan was hoping for in pushing his ideas on controlling federal taxes and spending. Limited government was a new mantra heard across the land. When Reagan talked about government being the problem instead of being the solution he knew he would have a receptive audience. Just as with the battles at Lexington and Concord, when citizens decided they would stand up against an unfair government with too much power over them, the Proposition 13 battle proved that voters were willing to take a stand over bloated government and excessive taxation. Reagan, comfortable with that position, promoted it. “Proposition 13 in California may be giving us one of those terms that become part of the language. Prop. 13 is becoming a symbol for citizen rebellion,” he said on his nationally syndicated radio commentary taped July 15, 1978.
Reagan ratcheted up the rhetoric for federal tax cuts and continually reminded people of California’s vote to show that a big federal tax cut could happen even if the current prospects for a federal tax cut were bleak. In a November 1978 radio commentary, noting that critics of the Kemp-Roth tax-cut plan said the bill was dead, Reagan responded, “Kemp-Roth is not dead — ideas do not die, it is simply waiting for the wisdom of the people to be accepted by the majority in Congress.”
The famous Reagan optimism was at work here. The tax cuts will happen; things will get better when Congress finally listens to the people. And, the people had spoken loudly with Proposition 13.
Reading from a book written by legendary Treasury Secretary Andrew Mellon, who served three presidents in the 1920s, Reagan showed his support for, and Mellon’s presaging of, what would became known as supply-side economics. “What (tax) rates will bring in the largest revenue to the government, experience has not yet developed, but it is estimated that by cutting the surtaxes in half, the government, when the full effect of the reduction is felt, will receive more revenue at the lower rates of tax than it would have received at the higher rates.”
Finally, Reagan showed how this theory could pay off by citing the John F. Kennedy tax cuts that resulted in “the longest, sustained economic expansion in the history of the country.”
Reagan returned to the Kennedy tax cuts in future broadcasts to make this same point, capturing the attention of listeners on a December 12, 1978, taped message with an against-the-grain comment: “Brace yourself. I would like to see the rich pay more tax.” He explained that he wanted to secure more revenue from the richest tax brackets by cutting taxes, and he cited figures from the Kennedy years that a drop in the tax rate from 91 percent to 77 percent actually increased revenue in those tax brackets from $2.5 billion to $4 billion.
But selling the national tax-cut agenda meant returning to Proposition 13 from time to time because that was the victory the people believed in — and that was the foundation from which to discuss changes in the federal tax code. Reagan made the connection when he opened a radio commentary taped August 7, 1978: “It doesn’t look as if Proposition 13 will go away as a conversation piece, or should I say the subject of taxes won’t go away?”
In a commentary in February of 1979, Reagan called Proposition 13 “the first amazing shot in the nationwide tax revolt.” It was the first shot in a revolt that had spread to other states. Reagan fully intended to take it all the way to Washington.
Ronald Reagan won the presidency largely because of his platform of less taxes and smaller government. He proceeded from there to push a dramatic tax cut through a resistant Congress. As president, Reagan did not forget that Proposition 13 helped him achieve his decades-long goal of cutting federal taxes. While he often talked about his Reagan Revolution coming from the west like a prairie fire, he said the match that started the fire was Proposition 13.
A few years after Reagan’s election, Howard Jarvis attended a luncheon speech given by the president in Los Angeles. When Jarvis returned to his office and was asked how the speech went, he responded, “When the president said, ‘What we’re trying to do in Washington is in the spirit of Proposition 13,’ the buttons nearly popped off my vest.”
— Joel Fox is the past president of the Howard Jarvis Taxpayers Association. He has written numerous opinion articles for newspapers including the Wall Street Journal, Los Angeles Times, and USA Today. His book, The Legend of Proposition 13, will be published in May.