In most of America, one of the worst impacts of high inflation is a sharp rise in property taxes. But that’s not the case in California.
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True, housing prices are some of the highest in the nation, due mostly to government policies restricting supply. But existing homeowners are protected by Proposition 13’s cap on annual increases in assessed value of 2%. According to the California Taxpayers Association, Californians would have seen their property taxes increase more than 7 percent this year without Prop. 13.
It is understandable why the political left – which wants all your money – has it in for Proposition 13, but we were surprised when the normally credible Tax Foundation, based in Washington, D.C., fell for some of the same falsehoods advanced by the “tax-and-spend” crowd. The Foundation is advising other states not to adopt Prop. 13-style reforms. We disagree and believe all states currently struggling with out-of-control property taxes should take a good, long look at California’s system based on acquisition value. It is vastly superior to one based on market value.
While the Tax Foundation admits that “Proposition 13 and other property tax assessment limits have done their job, keeping incumbent property owners’ taxes in check,” they assert that those systems result in “hidden costs.”
One clearly false claim is that assessment limits “discourage homeowners from renovating or adding onto their homes, for fear of incurring a dramatic tax increase.” In general, remodeling and repairs that are part of normal maintenance or cosmetic are not considered assessable. New additions that increase the square footage of a home or add new improvements that didn’t exist before are assessable—but that’s true everywhere. The difference is that in California, the reassessment is limited to the value added by the addition, with the rest of the assessment unchanged. So what you would pay under Prop. 13 is still less than what you would have paid in a market-based property tax system.
Next, the Tax Foundation claims that property tax assessment limits “make it less attractive for growing families to move past their starter homes or for empty nesters to downsize.” This isn’t true in California. Older homeowners (age 55 and up) can move and take their Prop. 13 base-year value with them to a new home. For younger homeowners, moving to a larger and more expensive home means higher property taxes — but again, that’s true everywhere. All homeowners benefit from Proposition 13, which capped the tax rate at 1%. Before Prop. 13, the statewide average tax rate was 2.67%, applied annually to the current market value. That means a young family’s property tax bill would be more than double in the first year of homeownership without Prop. 13.
Next, the Foundation states that assessment limits “interfere with efforts to change a property’s use.” That’s a polite way of saying that the land upon which your home rests is being “underutilized.” Does this mean you should be taxed out of it so it can be sold to someone who can build something deemed a better use, like a sales-tax-revenue-producing used car lot? No thanks.
Another myth is that acquisition value systems gradually “shift costs to newer, younger homeowners — the rising generation that [state] lawmakers want to keep in-state.” But under Prop. 13, all homeowners are taxed according to what they voluntarily pay for their property. The worst thing that could happen to a young family is to be taxed out of a home they just purchased because their tax bill is based on the vagaries of the real estate market. Prop. 13 gives new homeowners the predictability of knowing what their tax bill will be years into the future as well as a reasonable 1% rate cap.
And the real surprise of Proposition 13 is how it helps local government. Because Prop. 13 allows increases in assessed value of 2% per year and requires reassessment of property when it changes hands, it provides a stable, predictable and growing source of tax revenue to local governments. Property tax revenue in the Golden State has grown virtually every year since 1978 in percentages that exceed both inflation and population growth. Moreover, Prop. 13 provides a “shock absorber” effect during recessions when market values fall precipitously but assessed values – in the aggregate – fall slightly or not at all.
Prop 13 has been the salvation of millions of people in California. Otherwise they would have been forced out of their houses and moved into ‘boxes” of property owned by others that mostly can charge what they want, one way or another. That battle is certainly not over.
And the secret to its Longevity is HOWARD JARVIS ASSOCIATION.
If you are a home owner, you certainly should become a member and donate whenever asked. This is how they keep fighting the onslaught of resistance year after year.
Yes, support Howard Jarvis Association and carefully research the propositions on the ballot for deliberately confusing wording. Another good group is Reform California out of San Diego, doing lots of good work with conservative petitions and ballot issues.
Local tax-and-spend-aholic politicians are still allowed to “democratically” impose additional parcel taxes outside of valuation bases. A few years ago, during a strong and active sellers’ market, local counties heaped an enormous windfall, based on the ramping up of assessment bases. Unlike incomes, property will always be taxed because it can’t be hidden from the tax collector. A former member of Congress once told me that Prop.13 allows those of us over 55 years of age to avoid paying property tax. It will still accumulate as a lien on the title but won’t cause a seizure. However, he neglected to mention that, should there be a mortgage on the property, the “Acceleration Clause” would still allow the lender to foreclose.
Howard Jarvis voters wisely created Prop 13. It is the ONLY tax advantage California has when compared to most other states.Today have a RIVER of taxpayers bailing out from our beautiful state that are the result of ruthless debilitating taxation. Eliminating Prop 13 would turn the current exodus into a FLOOD.
Blue state Californians and New Yorkers are paying anywhere from 8% to 14% state taxes and still over spending it. Florida is charging ZERO state taxes and they are thriving and solvent. Why is that?
Sooner or later the Marxist Left will chase away all the producers and be stuck with the dependents. Politicians that have shamelessly used legislation to become benefactors of the poor. Maybe being proud of 40% of an Opaque Budget going to Social Services, in a Sanctuary State, is not a good thing?
The history of socialism always ends the same. When authoritarian power mongers run out of other peoples money, bad things happen. Incumbents are the bought and paid for enemy, Vote them OUT.