June
6, 2003, 7:00 a.m.
The
First Shot
Proposition
13 is where the Reagan Revolution began.
By Joel Fox
wenty-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.
<% dim printurl
printurl = Request.ServerVariables("URL")%> 
wenty-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.
