If California undid its ‘original sin’ and matched Texas on taxing property, it would raise more revenue than the billionaire tax, economists say

Proposition 40, a billionaire wealth tax proposal, will be on California voters' ballots, but it's the 1978 Proposition 13 that lingers in the background. This measure capped property taxes at 1% of assessed value, limiting annual hikes to 2%, and required reassessments only after sales or major renovations. After its passage, California turned to taxing incomes, including capital gains, to make up for lost revenue.

The state now boasts the most progressive income tax structure in the nation, with a top rate of 13.3%. This can push total tax to over 50% when combined with federal rates. The top 1% of earners contribute up to half of California's revenue, but the wealth tax could potentially raise $100 billion, according to supporters. Princeton economist Owen Zidar and University of Chicago Booth School of Business economist Eric Zwick argue that Prop 13 is the "original sin" of California's tax system, calling for its elimination as a more efficient and sustainable way to tax the rich.

Matching Texas' residential property tax rate of 2% would more than double California's residential property tax revenue, while also reducing home prices by around 13%. However, repealing Prop 13 would likely result in significant increases in property taxes for homeowners, and the state's already narrow tax base might not be able to support such a shift in taxation.