The lesson of California - Page 3

ANNIVERSARY SPECIAL: The Golden State that invented the tax revolt is failing, but the conservative movement presses on
Image by Tom Tomorrow

Friedman and Pinochet consulted openly and shared a basic disdain for social programs and progressive taxation. "The major error, in my opinion," Friedman wrote in a letter to Pinochet in 1975, referring to the government antipoverty programs Pinochet dismantled, was "to believe that it is possible to do good with other people's money."

The model Pinochet and Friedman developed in Chile would eventually go global — promoted by its top cheerleaders, Reagan and British Prime Minister Margaret Thatcher — and be implemented (with disastrous results for most citizens but creating huge profits for wealthy individuals and corporations) in Indonesia, Bolivia, Argentina, Peru, Russia, Poland, South Africa, Japan, and elsewhere.

But with the corporate media and conservative opinion-shapers focused mostly on economic growth — ignoring persistent poverty and the brutal tactics used to suppress the popular movements that tried to resist Friedman's "economic shock therapy" — Friedman had become a sort of free-market prophet by the time he died in 2006.

"In the torrent of words written in eulogy to Milton Friedman, the role of shocks and crises to advance his worldview received barely a mention," Klein wrote. "Instead, the economist's passing provided an occasion for a retelling of the official story of how his brand of radical capitalism became government orthodoxy in almost every corner of the globe."

California's fiscal shackles have been in place since 1978, when Proposition 13 and subsequent measures capped property taxes and required an undemocratic two-thirds vote to either raise taxes or pass the annual budget.

A Republican landlord lobbyist named Howard Jarvis charged onto the field that Reagan, Uhler, and their team had prepared and took advantage of a gaping hole in political leadership to set off a movement that would cripple the United States of America.

There was some logic to it then. Times were good in California in the 1970s, good enough that people were flocking to the state by the millions. That was driving up property values — and thus property taxes.

Jarvis bought his home for $8,000 in 1946; 30 years later, it was assessed at $80,000. In fact, inflation was running at close to 10 percent a year in California. Homeowners were getting huge tax hikes each year, and tenants were getting huge rent hikes at a time when state government had a budget surplus.

Homeowners saw millions of dollars sitting in the coffers in Sacramento while they couldn't pay their tax bills. Yet nobody in the Legislature or governor's office came up with a solution.

So when Jarvis showed up with petitions to roll back property taxes and prevent future increases, he found a broad base of support. Even tenants went along — Jarvis and his gang promised that property-tax cuts would be passed on to tenants and would mean the end of the escautf8g rent hikes.

Jarvis collected signatures for a radical measure that essentially blocked all property tax increases and allowed new assessment only when a parcel sold. It was, in the end, a huge tax giveaway to major corporations. Since commercial property turned over far less often than residential property (and since commercial sales could be hidden as stock transfers), big businesses wound up paying far less of the state's tax burden. Corporations used to pay about two-thirds of the state's property taxes, and individuals one-third; now that is reversed.

It didn't help tenants, either. Few of the landlords who saw the benefits of Prop. 13 passed the money along to their renters. Most just kept it. San Francisco activist Calvin Welch likes to say that Howard Jarvis was "the father of rent control."

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