Sample Business Studies Paper on The Effectiveness of Property Tax Rates

The Effectiveness of Property Tax Rates

The approval of Proposition 13, the citizens’ initiative to limit the property tax rate, had dire effects on both property owners as well as the local government. The property owners felt an immediate relief on the tax bills reduction, though, in terms of long-term stability, the property tax increased beyond expectation. Moreover, there was a strike in the decrease in the local property tax revenue used within schools, cities, and counties. It is evident that property taxes do form the largest source of revenue for the local and state governments (Glaeser, 1996). However, the local government is faced with challenges to provide services using the available resources after the implementation of Proposition 13 due to a reduction in revenue. A larger percentage of the local government’ revenue comes from the state government and a minor portion of property taxes.

The Proposition 13 has resulted in the cutback in public education spending. Due to the reduction of funds to facilitate training programs, most of the schools have eliminated certain programs that relate to coordination and instructional that were dependent on the revenues from the property tax. The other cutbacks relate to minimally supervised recreation programs, few library materials to facilitate education as well as limited health practitioners in schools. The public libraries do receive minimal funds from the cities to support curriculum programs or to sustain or for the upkeep of the teachers. Indeed, the school system of money was completely drained thus limiting teachers to perform their respective duties due to lack of enough resources. Many the school libraries were closed as municipal services deteriorated. The cities have also decreased electricity, water, and gas expenses to serve the community, which is a result of the implementation of Proposition 13.

Since the local government depends on the sales taxes, there has been an increase in a bad land planning within the cities encouraging reopening of the retail stores. The sales tax from these stores discourages the growth of the economy and other sectors that would provide better opportunities for the citizens. There were limited services rendered to customers as fees levied to property investors increase to compensate for the fund shortages in the cities. Before the Proposition 13 entered into force, the property taxes were much higher though the local city had an upper hand to debate on the percentage increase to be effected and the purpose for the money within the local government. However, the Proposition 13 limits the freedom and rest validation of property tax regulations to the governor and the legislature.

As much as the Proposition 13 aimed at empowering citizens against tax abuse especially by the government, it also had the power to determine what property taxes perform without engaging the local government. A big number of individuals also lost their jobs as family incomes declined cumulatively because of an implementation of Proposition 13, and the adverse effects outweighed the benefits bringing down the economy of the counties. The public schools, hospitals, and other facilities had to adjust to changes for them to adapt with the new regulation. The cities, which want to run their activities smoothly without any interference, had to look for more fund from other sources. Experienced investors and government staff should minimize any loss to the government, through a review of the changes in the property tax rates.



Glaeser, E. L. (1996). The incentive effects of property taxes on local governments. Public Choice (1986-1998), 89(1-2), 93.