HousingWiki

Proposition 13

Revision as of 01:30, 28 May 2017 by imported>Tmccormick

Proposition 13 (officially named the People's Initiative to Limit Property Taxation) was an amendment of the Constitution of California approved by voters in 1978, by means of voter direct initiative. Key provisions were: 

  1. Property tax (annual) limited to 1% of value.
  2. Assessments limited to increase of 2% per year from 1975 value, unless ownership changed or substantially redeveloped.
  3. State given authority over distribution of property tax revenues. 
  4. 2/3 majority of state legislature required to raise taxes.
  5. 2/3 majority in local elections to increase special (dedicated taxes). 
Proposition 13 backer Howard Jarvis, 1978

 

Provisions of the legislation 

1. Limit the tax rate for properties:

Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

Proposition 13 declared property taxes were to be assessed their 1975 value and restricted annual increases of the tax to an inflation factor, not to exceed 2% per year. A reassessment of the property tax can only be made a) when the property ownership changes or b) there is construction done.

State Responsibility:

The state has been given the responsibility of distributing the property tax revenues to local agencies.

Voting Requirements:

In addition to decreasing property taxes and changing the role of the state, the initiative also contained language requiring a two-thirds (2/3) majority in both legislative houses for future increases of any state tax rates or amounts of revenue collected, including income tax rates and sales tax rates.
It also requires a two-thirds (2/3) vote majority in local elections for most local governments proposing to increase special taxes. Proposition 13 received an enormous amount of publicity, not only in California, but throughout the United States.

 

Background / proposed motivations

[from Wikipedia: "California Proposition 13 (1978)."

There are several accounts of the origins of Proposition 13. The evidence for or against these accounts varies.

Issue of older, fixed-income Californians

One explanation is that older Californians with fixed incomes had increasing difficulty paying property taxes, which were rising as a result of California's population growth, increasing housing demand, and inflation. Due to severe inflation during the 1970s, reassessments of residential property increased property taxes so much, that some retired people could no longer afford to remain in homes they had purchased long before. An academic study found support for this explanation, reporting that older voters, homeowners, and voters expecting a tax increase were more likely to vote for Proposition 13.

School funding redistributed to poor districts by Serrano v. Priest rulings

Another popular explanation is Proposition 13 drew its impetus from the 1971 and 1976 California Supreme Court rulings in Serrano v. Priest, which somewhat equalized California school funding by redistributing local property taxes from wealthy to poor school districts. According to this explanation, property owners in affluent districts perceived that the taxes they paid were no longer benefiting their local schools, and chose to cap their taxes.
A basic problem with this explanation is that the Serrano decision and school finance equalization were actually quite popular among California voters.

Controversies over growth and corruption in public sector

Another explanation that has been offered is that spending by California's government had increased dramatically during the years prior to 1978, and taxpayers sought to limit further growth. The evidence supporting this explanation is limited, as there have been no studies relating Californians' views on the size and role of government to their views on Proposition 13. However, it is true that California's government had grown. Between 1973 and 1977, California state and local government expenditures per $1000 of personal income were 8.2 percent higher than the national norm. From 1949 to 1979, public sector employment in California outstripped employment growth in the private sector. By 1978, 14.7 percent of California's civilian work force were state and local government employees, almost double the proportion of the early 1950s. 

In addition, during the early 1960s, there were several scandals in California involving county assessors. These assessors were found rewarding friends and allies with artificially low assessments, with tax bills to match. These scandals led to the passage of AB 80 in 1966, which imposed standards to hold assessments to market value,  which caused a large number of California homeowners to experience an immediate and drastic rise in valuation, simultaneous with rising tax rates on that assessed value, only to be told that the taxed monies would be redistributed to distant communities. The ensuing anger started to form into a backlash against property taxes which coalesced around Howard Jarvis, a former newspaperman and appliance manufacturer, turned taxpayer activist in retirement.


Consequences

 

Reform proposals 

 

 

 

References

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