Tax Day 2026: What Happened When California Cut Taxes in the 1970s

Americans are getting squeamish about paying taxes.

Most people don’t enjoy paying Uncle Sam, but for much of the 2000s and 2010s, a significant percentage of Americans thought the amount of federal taxes they paid was “about right.” according to Gallup. But recently the share saying their taxes are “too high” has risen; last year, Nearly 60 percent of Americans said they pay too much.

Call it the Great American Tax Revolt, or maybe the Third American Revolution. Whatever we call this anti-tax wave, its effects are already rippling across the country. Republicans in red states are reducing property taxes, or threatening to eliminate them altogether. Even some Democratic lawmakers are proposes massive tax cuts to be paid for with tax increases on only the very richest.

All of this reminds Isaac Martin, a professor of urban studies at the University of California at San Diego, of the battle over Proposition 13: a 1978 California ballot measure that limited property taxes statewide, triggering a chain of fiscal and social consequences that the state is still grappling with.

“I think the history of California really teaches us that you can have your government for free, but you can’t get it for free,” Martin said Today, explain co-host Noel King.

King and Martin talked about the history of property taxes in America, the story of Prop 13, and what California’s experience indicates about where the rest of the country may be headed.

Below is an excerpt of their conversation, edited for length and clarity. There’s a lot more in the full podcast, so take a listen Today, explain wherever you get podcasts including Apple Podcasts, Pandoraand Spotify.

What happened to taxes in the 1970s?

There was what we now call the property tax revolt, a large grassroots movement of protest against local property taxes. It was a nationwide thing. It happened in communities all over the US, but people really remember the events in California because Californians at the time, in 1978, amended their constitution to limit the property tax. And that tax cap, which they mentioned Proposal 13then became national news and had all kinds of impacts in and outside of California.

I lived in Los Angeles for a few years and I remember Proposition 13 being a big topic of conversation, but not everyone will know about its history. Why does Prop 13 matter? Why is this such a big deal?

Proposition 13 is a big problem for a couple of reasons. The first is that it changed the state’s tax structure very dramatically. It said that local governments could not levy any property tax of more than 1 percent, so it capped the property tax rate at 1 percent.

The second and most important thing it did was put an annual limit on the amount that could increase the assessed value of your property for tax purposes from year to year. Even if your home has increased in value very quickly, as far as the local tax assessor is concerned, it hasn’t actually increased in value more than 2 percent per year. And it has curbed the finances of local governments in California, among other things.

It also gave property owners a tax break that grew over time, the longer they stayed in their homes. This was the beginning of a veritable cascade of similar changes to California law, including later initiatives in the 1980s that said the tax break you have on your home because you got it early, you can pass it on to your children. You can pass it on to your grandchildren. That’s one reason why Peter Schragwho was the (opinions) editor of the Sacramento Bee for many years, said in the 1990s, Listen, we now have a hereditary aristocracy of real estate in California.

The story of Proposition 13 in California matters for at least a few reasons. One of those reasons is that it’s a real cautionary tale that you can really lose something very valuable if you let your anger about taxes take over and you don’t think carefully about what to do with that anger. As I understand it, this is a story of the simplest, worst solution to a real crisis.

Where does (Prop 13) come from?

First, property taxes have always been a mess in America. Property taxes are the oldest taxes we have in the United States. It predates the republic. And until the middle decades of the 20th century, the property tax was still administered as if we were in the horse and buggy era.

The people in charge of figuring out how much your home or your business is worth for the purpose of taxing it were political animals, and they didn’t tend to have much expertise in the actual valuation of property. Instead, what they would do is just write down from year to year, Oh, we wrote down this number for your house last year. Let’s write it down again this year.

They gave these kinds of informal tax breaks to people in a way that was often very political as well. They can exchange a low assessment for a bribe. They very commonly traded low ratings for votes. And in the 1960s, led by California, many states then began to reform how they administered the property tax. They brought in computers, they professionalized assessment, and suddenly many, many property owners, especially homeowners in the United States, began to be taxed on the current values ​​of their homes for the first time. And it turned out they didn’t like it.

This was a cause of an incredible freak-out – people petitioning to abolish the property tax. One of the most colorful figures in the movement was a real slinger named Howard Jarvis, who was a Los Angeles entrepreneur, a sort of serial entrepreneur, who first campaigned to abolish the property tax in the late 1960s and got nowhere, but got enough traction that he decided it was worth continuing to try.

He teamed up with a used car salesman named Paul Gann, and actually took inspiration from the Los Angeles real estate assessor, who was also advocating for property tax reforms, a guy named Phil Watson, and wrote a restriction—a state constitutional amendment to limit taxes—that became Proposition 13. They collected more signatures than any ballot initiative in California history. And in June 1978, a majority of voters went for it.

Why did a majority of voters go for it? Was it difficult to convince people?

Jarvis later wrote in his memoirs that the best argument was simply to go to people and say: Sign it, it will lower your property taxes.

Okay, so the snapshot is exactly what? What happens after voters say, Yes, that’s what we want.

The quality of services has declined in many cases. For example, it is clear that there has been a shift in fire protection away from professional fire departments and toward volunteer fire departments in some parts of the state.

It hurts the schools. Of course, school funding has continued to increase in California as elsewhere in the US, but California used to be at the top in terms of quality of education in primary and secondary education and in terms of school spending. And now it certainly isn’t.

This has harmed the quality of infrastructure – potholes in the roads, response times of first responders. This shifted taxes from the state’s tax structure to income, which means that California’s tax system is truly volatile – in a boom, a lot of money can flow into the state’s coffers, and in a recession, the state budget really suffers. During the financial crisis, this meant that local governments that could no longer rely on much property tax revenue were particularly vulnerable to bankruptcy.

It also created all kinds of unfairness – new unfairness, rather different from the old system. Now, you may actually be paying a lot more taxes than someone else in your neighborhood who has an identical house worth the same amount of money, just because they bought their house earlier than you. And they may agree that it’s unfair, but they may not agree to change it because it’s an unfairness that allows them to stay in their home.

You are aware that Americans are getting irritated about paying taxes, and I wonder if you think it is fair to look at California and see a warning about where the rest of the country may be headed?

Away. I mean, I think the history of California really teaches us that you can have your government for free, but you can’t get it for free. The lesson here is that we value and should value many of the public services and public goods that our governments provide. That doesn’t mean they shouldn’t function efficiently, but it does mean that when you think about how much you’re willing to pay for them, you also need to consider what you’re willing to give up.