California’s Prop. 13 Loopholes Are Costing Us Billions We Can’t Afford to Lose
When I think back to growing up in the Los Angeles suburbs during the 1970s, I remember a California that felt almost impossibly comfortable — mild summer nights, newly built schools, and open fields still waiting to be explored. I rode in the back of my parents’ station wagon without a seatbelt, blissfully unaware of how much the state around me was about to change.
Fifty years later, that transformation is staggering. Few people in the 1970s would have guessed California would grow into the world’s fourth-largest economy, trailing only the United States, China and Germany. The technology born here reshaped how people everywhere live and work. But while the state’s economy soared, its government didn’t keep pace with the needs of its own residents.
Our population nearly doubled, yet housing production never caught up. Public schools recovered somewhat after being gutted by disinvestment in the 1980s and ’90s, but achievement gaps along racial and economic lines persist. California became a global leader in innovation, but did little to address a widening wealth gap that today rivals the excesses of the Gilded Age. We are equally unprepared for the economic disruption of artificial intelligence and the mounting toll of climate-driven disasters.
It’s tempting to blame political gridlock or one-party dominance in Sacramento for these failures. But the real culprit isn’t partisanship — it’s structural, and it traces back to a ballot measure passed nearly half a century ago.
Proposition 13, approved by voters in 1978, was pitched as a way to protect homeowners — especially retirees — from being taxed out of their homes due to rising property values. For individual homeowners, that protection still makes sense: taxes are based on a home’s purchase price rather than its current market value.
But over the decades, corporate attorneys found ways to exploit loopholes in the law, allowing commercial and industrial property owners to dodge reassessment even when ownership effectively changes hands. The result has been a slow bleed of public revenue that benefits large corporations far more than everyday families.
According to a recent analysis by researchers at the University of Southern California, closing this commercial and industrial loophole — and assessing those properties at fair market value — could generate as much as $25.1 billion annually for state and local governments. That’s not a typo. Billions of dollars a year that could go toward schools, infrastructure, housing and health care, instead of padding corporate balance sheets.
Imagine what California could accomplish with that kind of money, especially now, when the state faces mounting financial strain from federal policy changes.
President Donald Trump’s sweeping tax and spending legislation — branded the “One Big Beautiful Bill” — has already begun shifting resources away from working families and toward the wealthiest Americans. Roughly 2 million Californians are expected to lose Medi-Cal coverage by 2028, and nearly half a million more are being removed from CalFresh food assistance rolls. State officials now must close a budget gap exceeding $20 billion annually. Meanwhile, school districts across California — including many here in the Inland Empire — are bracing for layoffs and shrinking budgets.
It’s easy for ambitious policy goals to get lost in bureaucratic inertia, feeding public distrust among residents who are already struggling to make ends meet. But California has shown it can act decisively when it chooses to. The rollout of transitional kindergarten — giving every 4-year-old in the state access to an additional year of public education — is proof that smart, forward-looking policy can ease financial pressure on families while restoring faith in government.
Now, as a new legislative session approaches and California prepares to elect a new governor, lawmakers have a genuine opportunity to respond to federal cutbacks with meaningful reform. This isn’t about turning back the clock to the California of 1970 — it’s about building the foundation for the California of 2070.
Until state leaders find the will to close these long-standing tax loopholes, our communities remain vulnerable — much like I was as a child in the back of that station wagon, without a seatbelt or headrest, just bracing for whatever comes next.
Original source: CalMatters
