I’d like to bring everyone’s attention to a column in Wednesday’s LA Times: We can’t afford Proposition 13 anymore. Excerpt:

… I know I’m asking for it by even suggesting that Proposition 13 is doing more harm than good. But this topic resurfaces from time to time, and this should be one of those times.
Schwarzenegger is expected to declare a state of fiscal emergency this week to deal with the budget mess. He proposed a constitutional amendment in Tuesday’s State of the State address to give him more power over California’s finances.
It’s pretty simple, though. Either we spend less money or we raise revenue, or both.

Please go read the rest.
I’ll be the first to say that Prop 13 did a good deed by helping elderly people stay in their homes. A fixed-income retired person should not face ever-higher tax payments because the houses in the neighborhood are rising in value. Any changes to address the problems created by Prop 13 must take this into account.
But there is no justification for the present situation where people buying a new house can pay as much as ten times what long-time residents next door are paying. And certainly commercial real estate – shopping centers, hotels, office buildings, etc. – should not get a huge tax break! The reason that our legal system grants limited liability and other benefits to businesses is because businesses are supposed to serve the public good. Paying taxes that help us build the roads that transport the products that businesses sell and building schools that educate the employees are part of that public good.
As we address this budget “emergency” I think the very first thing the state should look at is fixing the tax system, recalling Prop 13, closing loopholes, increasing taxes on profitable corporations, taxing oil companies as they pump our oil out of the ground, restoring the vehicle license fee and imposing a surcharge on the wealthiest.
There is more on this over at Calitics where Robert in Monterey write,

The problem is that not enough Californians yet see how Prop 13 works against their interest. The savings on the property tax bill isn’t worth the lack of health care, the inaccessibility of education, and the decaying infrastructure that is starting to cripple our economy. Prop 13’s effect was to create a homeowner aristocracy in this state, where a lucky few who bought homes before, say, 1985 are able to withstand better the economic storms lashing the state, while the rest of us suffer to maintain their privilege.

Along with the budget disaster it has created, Prop 13 distorts the real estate market by creating a huge disincentive for people to sell property that they should sell.