In 1978 the property tax rate throughout California averaged almost 3% of market value, with no limits on increases either for the tax rate or property value assessments. Owners’ tax bills skyrocketed, often beyond the homeowners’ ability to pay. Seniors, homeowners, small businesses and commercial property owners were faced with the real possibility of losing their homes and properties because they couldn’t afford 50-100% increases in their property taxes.
Proposition 13 was put on the ballot in June of 1978 to stop these out of control increases by limiting property tax rates, increases and reassessments. It was approved by two-thirds of California voters. Here’s what Proposition 13 did:
- Reduced property taxes by about 57%.
- Set a uniform 1% property tax rate, and limited increases to no more than 2% a year.
- Establishes property valuation at its purchase price.
- Provided stability to the increasingly volatile tax structure in California.
- Provides certainty to property owners to budget for their future and gives them protection from the runaway property taxes that would have forced many to sell their homes or lose their businesses.
- Equally protects all property owners ranging from seniors and homeowners to small businesses.
Need for Property Tax Protections
If Proposition 13 had not been approved by voters in 1978, similar property tax rate protections would have been needed and established in at least two other real estate bubbles where small businesses and homeowners would have felt a similar pinch in the late 1980s and mid-2000s. Instead, Proposition 13 was in place during these bubbles protecting property owners from dramatic tax increases and local governments from wild revenue increases and decreases that would have decimated local programs and resources.
Ensures Adequate School Funding
Proposition 13 did nothing to change how school funds were allocated. Instead, it was the California Supreme Court in Serrano vs. Priest, an equal-protection case, which said revenues must be more equitably distributed among school districts.
According to the California Department of Finance, total education funding has grown dramatically and increased even with Proposition 13 in place.
|Year||Total Education Spending||K-12 Percent of State Budget|
Additionally, increasing property taxes does not increase the Proposition 98 education funding guarantee, providing no assurance that more tax dollars would make it to the classroom.