In what has become an annual ritual, the California legislature struggles to pass a budget in the face of soaring deficits. The legislature and the governor spar over where to make the obligatory cuts in public spending. And each year, the deficits, fiscal crisis, and political drama all worsen. The current economic recession has exacerbated the revenue shortfalls, with government at all levels affected. To be sure, this is a national trend, but problems in the Golden State are exacerbated as Californians confront the institutional legacy of a constitutional amendment, ratified more than 30 years ago in a statewide initiative, that fundamentally altered the “rules of the game” for the state's system of public finance. On June 6, 1978, California voters approved Proposition 13, which transformed the property tax by basing it on the acquisition value of property as opposed to its market value. The amendment limited annual property tax increases to 2% and imposed stringent requirements for a two-thirds majority in both houses of the legislature for new tax increases. A comparable measure restricted local government.

The most immediate consequence of Proposition 13 was a sharp reduction in revenue from the property tax—almost $7 billion a year. But it took years for the political repercussions to be fully felt and comprehended. Even now, more than three decades later, there remains considerable disagreement among scholars as to the origins of the tax revolt and its long-term effect on politics and public finance, both in California and nationally. With this in mind, two new books would reevaluate Proposition 13 on its 30-year anniversary. The first is a collection of essays, After the Tax Revolt, edited by Jack Citrin and Isaac William Martin. Citrin was the coauthor (with David O. Sears) of the definitive study of the vote and attitudes behind Proposition 13, Tax Revolt: Something for Nothing in California (1982), and his introduction to this short volume provides a useful overview of the fiscal consequences of the California tax revolt: a shrinking of the share of state tax revenue derived from property taxation, a long-term shift of the tax burden to the state sales tax and personal income tax (following an initial reduction in the income tax in the face of an “embarrassingly large” surplus of $11 billion), and perennial deficits as the gap between public revenue and expenditures continues to widen. But one thing did not happen: Big Government did not shrink in California. As Citrin observes in the edited volume, “Proposition 13 may have slowed the dreadnought of government spending but certainly has not reduced the overall size of government” (p. 7).

If Proposition 13 purposefully restructured California's system of public finance, not every consequence was intended. Most notably, political power shifted from local government to the state as control over property taxation was centralized. This “transfer of power to Sacramento” and the corresponding “reduction in local fiscal autonomy” is ably recounted in Kirk J. Stark's essay, “Proposition 13 as Fiscal Federalism Reform” (p. 155). The impact of Proposition 13 on the state's “fiscal constitution” is further delineated in a contribution from David Gamage. Elsewhere, Terri A. Sexton explores the economic effects of the new property tax regime. Sexton elucidates the “lock-in” effect” for residential housing that resulted from Proposition 13, as property taxation was switched from a market base to an acquisition base. Because of this, homeowners face significant property tax increases if they move—even if buying a replacement home of equal value. This creates a disincentive to mobility, which results in an inefficient allocation of economic resources. Other economic consequences of Proposition 13 are considered in Steven M. Sheffrin's essay, “Rethinking the Fairness of Proposition 13.”

What triggered the tax revolt in California in 1978? The conventional wisdom is that Proposition 13 expressed a conservative backlash against higher taxes and an expanding social welfare state in the postwar era. In The Permanent Tax Revolt, Isaac William Martin challenges this interpretation and offers an intriguing alternative. Like Sears and Citrin, Martin traces the origins of the California tax revolt to the passage of reform legislation by the state legislature in 1967. The legislation, known as A.B. 80, was a response to investigations that revealed widespread abusive practices whereby locally elected tax assessors routinely accepted bribes (often disguised as “campaign contributions”) in exchange for holding down property assessments for favored taxpayers. Under the reform measures implemented by A.B. 80, qualifications for assessors were raised, regular assessments were required, and the tax base was fixed at 25% of the market value of real estate. According to Martin, this modernization and reform of the property tax system is what prompted the backlash of Proposition 13.

Martin's argument is that under the long-standing system of property taxation as it evolved over decades, homeowners enjoyed an “informal tax privilege” as local assessors sheltered them from rising property values. Under the traditional system, assessors used their discretion to reward “favored constituencies” with below-market assessments. Often this was the quid pro quo for political favors, but it also was done to shelter elderly homeowners on fixed incomes from increased assessments and higher property taxes. This informal system of “fractional assessments,” which doled out tax breaks to the politically connected and, at the same time, implemented a “kind of hidden social policy,” was undone by the reform efforts targeted at the corruption of local property assessors. Opposition from assessors and local government had blocked all prior efforts to modernize the system of property assessment, but pressure from the judiciary and the publicity generated by the investigations into corrupt practices by assessors suddenly bore fruit in the 1970s. California got reform and a “modern” system of property assessment. The result? A tax revolt that undermined the fiscal constitution of California.

Martin links the property tax revolt to the withdrawal of the informal tax privilege bestowed upon homeowners by local assessors for decades. The abolition of this privilege, and not rising taxes or government spending, triggered the California tax revolt. As Martin puts it, “state officials caused the tax revolt by doing away with informal tax privileges, and people fought to restore those privileges because they provided a kind of social protection from the market” (p. 5). In pegging the property tax to market values, legislators eliminated the special treatment that the politically connected and elderly had come to expect, thereby exposing them to higher taxes. This created a constituency for rebellion. Ironically, as the antitax movement gathered steam, activists from both the Right and the Left took aim against the property tax. Those on the Right (such as Howard Jarvis, soon to emerge as the leader of the movement) denounced the property tax as punishment against the thrifty who owned their own homes, while activists on the Left denounced the property tax as regressive and supporting a system of public finance that condemned poor communities (those with lower property values and, hence, lower revenue from property taxation) to substandard public services—in particular, inferior public schools. Both factions saw the property tax as disproportionately hurting the elderly. In the end, the antitax social movement was appropriated by the Right, but it is important to remember that the referendum on Proposition 13 had broad popular appeal across the political spectrum, with 65% of voters approving the constitutional amendment. Today, polls show that among Californians, it remains highly popular—if not fully understood.

Whether the tax revolt in California affected fiscal policies outside the state is another matter. After 1978, opponents of property taxation and rising state budgets organized in Michigan, New York, and Massachusetts—all states with high property taxes. Arguably, similar conditions (e.g., rising property values, double-digit inflation, and high property taxation) triggered indigenous revolts in these states. But the California tax revolt influenced events beyond its borders as antitax activists across the nation were emboldened and encouraged by the success of the Proposition 13 movement. Martin examines the tax revolts in these states, as well as tax rebellions in France, the United Kingdom, and Denmark, where events played out differently under different political conditions. Indeed, these are such dissimilar cases that it is difficult to draw meaningful connections between events in California and Europe. The more fruitful comparison is between the California antitax revolt and those elsewhere in the United States.

It can be argued that the vote for Proposition 13 had an impact on national politics as well, although the connection is tenuous. Martin himself concludes that “there is no evidence that the tax revolt changed the fundamental beliefs of the American public” (p. 142). At first glance, this seems to contradict the underlying premise of his book, subtitled How the Property Tax Transformed American Politics. I think what Martin means to say is that the course of American politics was changed by events in California, even if deeply held political beliefs were not. After 1978, the faithful of the Republican Party became even more firmly wedded to an antitax rhetoric, placing tax cuts, as Martin puts it, “permanently on the partisan agenda.” But one must be careful in drawing a line directly from the California tax revolt to the GOP's unrelenting campaign to cut marginal tax rates. Ronald Reagan (and George W. Bush after him) devoted considerable political capital to cutting marginal rates for the federal income tax, but this was nothing new in the Republican Party. Conservative Republicans have always had a strong aversion to income taxation, opposing the first national income tax enacted in 1862 during the Civil War, as well as populist attempts to resurrect it in 1894. Republican administrations aggressively pursued tax cuts during the 1920s, and following World War II, the Republican-controlled Eightieth Congress enacted tax-reduction legislation over repeated vetoes by Harry Truman. In recent decades, the antitax posture of the Republican Party has reflected the narrow economic interests of its pro-business base, while Proposition 13 was more of a grassroots populist campaign.

That said, these are overlapping political movements to a great extent. On the basis of their demographic analysis of support for Proposition 13, Sears and Citrin characterized the movement as a “revolt of the haves” (p. 140). The virtue of Isaac William Martin's book lies in locating the origins of the political movement that rocked California more than 30 years ago.