Real Estate Round Up: Happy 40th anniversary Prop 13

June 6, 2018, marked the 40th anniversary of the passage of Proposition 13 (Prop 13), a 1978 ballot measure that reduced property tax rates on homes, businesses and farms and capped how much property tax rates could grow in the future. The core motivation of Prop 13 was to protect Californians from being taxed out of their homes by the state.

Throughout the 1960s and 1970s, property values and property tax rates in California began skyrocketing. Property taxes were based on a property’s market value, which often increased faster than inflation and the homeowner’s income. Elderly homeowners on fixed incomes faced with ever-escalating and often unpredictable property tax bills were being forced to sell their homes to meet the payments.

The Legislature made efforts at property tax reform, but relief failed to materialize. At that time the state’s revenue was overflowing with “surplus” tax dollars so the Legislature was not highly motivated to push through reform. The Voters were not going to be deterred. Nearly two-thirds of registered voters supported Prop 13. Voters knew that it would finally take power away from the tax collectors and give it back to the taxpayers.

Proposition 13, which limited property tax rates to 1 percent of a property’s assessed value, limited assessment increases to no more than 2 percent annually, and established that state tax increases can only be done via a two-thirds vote of the Legislature was passed into law 40 years ago.

Efforts to repeal Prop 13 began almost immediately after it passed and continue unabated today, but Prop 13 remains very popular. Most homeowners still support the protection of Prop 13 and oppose any reformation of it.

Opponents of Prop 13 have claimed that the measure has shorted programs funded through the state budget, such as schools or local government services however property tax revenue has continued to grow, because of assessments on new construction and reassessments when a property is sold.

It’s important to remember how and why Prop 13 came to be, to protect it into the future. California tax burdens are among the highest in the nation. We have the highest individual income tax rate, the second-highest gas tax rate, the sixth-highest total tax burden, and the ninth-highest combined state-local sales tax rate.

Since the passage of Prop 13, property tax rates finally became predictable, manageable and fair. Defending Prop 13 is critically important, it’s the only safeguard that keeps government from taxing people out of their homes.

Hand in hand with Prop 13 are two existing statewide initiatives that have served to benefit current homeowners when they choose to move within the state.

Prop 60 permits homeowners over the age of 55 to transfer their current property tax basis to a new home, of equal or lesser value, within the county of the current property. Eleven counties within the state acknowledge and accept Prop 90 which allows homeowners over the age of 55, in any county to transfer their current property tax basis to a new home, of equal or lesser value, within those 11 counties.

San Diego County is one of the 11 counties that accept that property tax transfer. Homeowners can use this exemption once in their lifetime.

The California Association of Realtors is taking Prop 60 and 90 to the next level. CAR has received the required signatures to put an Initiative on the November ballot that will expand these propositions so homeowners over 55 can transfer their basis to any county in the state, for any value by utilizing a blended tax basis, multiple times. It also has a provision to assist disabled homeowners and homeowners affected by a major disaster like the fires that have swept through the state.

Opposition exists for this, like the opposition for Prop 13. They fear that state programs will be shorted, such as schools and local government services. It is not any truer today than it was 40 years ago, but I guess it plays well for those who want to put fear in the center of the discussion.

Know this, Prop 13 and any initiative that stands in opposition to the state’s ability to raise taxes and take more of your money, will be opposed by many special interest groups. Not because it’s true, but because, the state is a hungry organism that will never be satisfied.

The California Association of Realtors has always claimed the title “Champion of Home” because we believe that homeownership is still the American Dream and that everyone should be able to enjoy that dream.

We urge you to support the yet unnumbered initiative for Property Tax Fairness on the November ballot.

Note: The historical background on Prop 13 was taken from an op-ed by State Senator Joel Anderson which was originally published in the La Mesa Courier, June 22.

Kim Murphy can be reached at [email protected] or (760) 415-9292 or at 130 N Main Avenue, in Fallbrook. Her broker license is #01229921, and she is on the board of directors for the California Association of Realtors.