However, given my skepticism, there is another social goal that can be achieved without violating my libertarian principals. If states were to increase gas taxes and in exchange lower property taxes this should help increase demand for homes.
I'm not sure what the total property tax revenue for California is, and their rate averages a pretty low 4.77/$1000 of valuation, but if you estimate that the average home is worth $400,000 in the state, then eliminating property taxes would save the average home owner a little over $1,900/year, or $158/month. Assuming 3.5 people per house, this means about 10 million homes, and thus $19 Billion in lost revenue.
On the gas tax revenue side we can again use some approximations. Americans use 390 million gallons of gasoline per day. If we assume California uses 1/8th, since they have about 1/8th of the population this equals 48.75 million gallons per day. Multiply by 365 days and you get around 17.8 billion gallons per year. If California were to charge a new tax of a dollar per gallon this would lead to around $17 Billion in revenue (assuming a slight decrease in driving).
This back of the envelope estimation might not be perfectly accurate, but it looks like the gasoline tax could help eliminate property taxes in the state. Getting rid of property taxes would make homes cheaper, but not lower their face value (sales price). It should help offset some downward pressure on home prices without the moral hazard problems of bailing them out. It also seems politically feasible given the "green" inclinations of the party in power.