The Executive Summary:
Before Proposition 13, there were two major flaws in California’s property
1. Property taxes could be assessed by cities, counties and school boards.
Real property was assessed arbitrarily depending on skill, whims
and other factors.
The results weren’t too surprising:
A. Cities, counties and school boards would determine how much they wanted
to spend, then would set property taxes to bring in that amount.
Assessors had wide discretion and some used it so indiscreetly they ended
up in prison.
C. Gross disparities
in property tax resulted (e.g., one property assessed at 4.6%
another at 114% of its market value).
D. Property taxes skyrocketed and assessors had
a field day when home prices shot up in the early 1970s. That
was only a paper increase in theoretical "net worth" -
home owners’ incomes
did not double or triple to match. As a result, many homeowners -
especially those on fixed incomes and at the lower end of the economic
scale – had to sell their homes since they couldn’t pay the taxes.
So on June 6, 1978, Proposition 13 was passed with a 65% to 35% vote. The
i) The property tax basis was changed from "assessed value" to "acquisition
value" and is readjusted when the property is sold.
ii) The tax is set at 1% of the purchase price.
iii) The tax may not be increased more than 2% per year.
iv) Any new construction
is assessed in addition to (ii) and (iii) [you
can't add $1 million in new construction and pay $100k property taxes].
Was this responsible for California’s current fiscal crisis?
"Between 1977 (the year before Prop. 13) and 1999 (the latest year for
which complete data is available), inflation and population grew at a combined
rate of 235 percent. State revenues grew 448 percent, California city revenues
grew 333 percent and county revenues grew 326 percent. If Prop. 13 was
supposed to slow government spending, it was a complete failure. Governments
simply shifted to other taxes." [Senator Tom McClintock]
What Proposition 13 did achieve was to give home owners a chance against
the "Spend-And-Tax" state government.
And that’s a good thing.
So leave it alone.
Especially if you’re from out-of-state.
[I'll be doing a more detailed Briefing Sheet with
charts and all later on my site. If you'd like to know when
it's ready, drop me a note from