Part Five: Why is Proposition 13 so Important to so Many Californians with Different Incomes & Property Values?

California Proposition 13

It was a decisive majority that voted in California Proposition 13 on June 6, 1978. The joy and relief sweeping through the state, they say, was palpable. You could cut it with a knife. The anxiety over property tax instability and arbitrarily increasing financial demands on property owners had reached a genuine tipping point by that time, and voters knew that a change was needed, and on the horizon. Instability and anxiety was about to be replaced with the ability to avoid property tax reassessment in California… and a host of other tax relief benefits.

With Howard Jarvis and his mega-motivated colleagues leading the charge, this modern day tax revolt was one of the very few in American history that wasn’t a thinly disguised “tax cut” for top conglomerates and the wealthiest Americans, falsely entitled “tax reform”. It was a genuinely revolutionary “tax reform” initiative, passed by nearly 66% of the voting public in California. Beneficiaries and heirs inheriting land and homes, and naturally inheriting property taxes, were now able to keep parents’ property taxes and avoid property tax reassessment in California.  Parent to child transfer of a house and/or land had become legal parent to child exclusion from present day property value assessment, or property tax reassessment. And the numbers added up for home owners all across California.

Both businesses and residents were pleased with the money they would be saving every year. Naturally, the wealthier the property owner the larger the savings by having the ability to avoid property tax reassessment every year, year in, year out. And most likely the stark difference between the savings experienced by families in the six-figure range, for example, and families with homes in the seven-figure range, started the ball rolling on the conspiracy theory that Proposition 13 was all about savings for the rich, and no one else.

Naturally this was, and is, a misrepresentation of the benefits all Californians enjoy from Proposition 13, and Proposition 58, tax relief.  Certainly, the wealthy were saving more, in aggregate numbers, however 2% maximum tax rate forced property taxes become predictable, and manageable, for all Californians who owned their own home. The numbers affected by property tax transfer are simply relative. The rich pay more and save more, while the middle class pays less and therefore saves a little less.

Bringing us all the way up into the present, there in now a new threat to Proposition 13, egged on by the same critics that have been spouting false conspiracy theories and rumor campaigns since Prop 13 passed in 1978, and other special interest groups. It is called a “split-roll” property tax initiative, backed by some of the most powerful public employee unions in California, including Service Employees International Union, the California Teachers Assn. and the California Federation of Teachers. And it is now threatening to limit, and destroy, various tax relief benefits for a variety of business owners.

This 2020 ballot initiative has a misleading name, which supporters and critics of Prop 13 call “The California Schools and Local Communities Funding Act of 2020” Better known as the “split-roll tax initiative”, this plan would reassess and wage a tax hike war on all commercial and industrial properties – including retail stores, manufacturing plants, and popular malls all over the state. This so-called split-roll property tax measure would also remove Proposition 13 benefits protecting farmers, and return to the hated, dreaded yearly present-day tax reassessments measured by present-day market value – targeting all agriculture-related facilities.

Supporters of Proposition 13, Proposition 58, involving parent to child property transfer; and Proposition 193, supporting grandparent to grandchild property transfer… are afraid that this new “split-roll” ballot measure is likely to open the door to unwanted special interest backed tax hikes… and create a rather negative slippery slope affect. In other words, people are frightened that once you open the bottle, you can‘t put the genie back in again!  And that all the folks who want property taxes to return to the bad old days will have a foothold again. This is what nearly ¾ of the state does not want.

Most people are hoping the majority of the state will remember the bad old days before the 1978 ballot initiative to cap property tax increases for both residential and business properties began providing the public with a sense of security and consistency, insuring that property owners would not be literally taxed out of their homes and businesses ever again.  Proposition 13 has consistently provided middle class home owners in California, of all ages, with real tax relief. However, it is true  that before this initiative was passed, many elderly and senior Californians that were living on a fixed income were actually pushed out of their homes due to out of control property tax rate hikes. And most people in California are voicing their opinions telling their representatives that they never want to see this type of tragedy ever occurring again in their state.

Proposition 13 & 58 Tax Relief Still Popular with Californians, Despite Critics

Is Proposition 13 & 58 in demand despite critics… Without hesitation, the answer is yes. On June 6, 1978, 42 years ago, California voters passed Proposition 13 with 65% of the total vote. And to this day, interestingly enough, 65% of “likely voters” in California still support this tax relief initiative.

This popular and unique property tax break immediately froze California home owners’ real estate tax rate at 1% of the assessed value of their property – i.e., the assessed value on the day they bought the property.

So if you were a California resident at that time, you clearly saw that taxes on your home and land were no longer reassessed at current market value – and no longer went up more than 2% in total. And home owners in California are fortunate enough to be benefiting from the same formula 42 years later.

Moreover, the ability local governments had to raise money for city and town running budgets, including school funding – by arbitrarily raising real estate taxes whenever they felt it was needed – was all of a sudden severely restricted. And restrictions remain popular with consumers to this day.

The only parties perhaps not so thrilled with these restrictions and everything else associated with Prop 13 are political parties motivated to destroy Proposition 13 regardless how many critical protections for commercial and industrial properties are  guaranteed by Proposition 13, not to mention raising their commercial property taxes by billions… Plus certain individuals involved within the political arm of the educational system in California… as well as conventional executives, realtors, brokers, and other functionaries involved in the real estate market.

Click Here: For More Discussion on Critics of Proposition 13, at the Taxpayers Association… and on the stability home owners, renters & businesses have from Proposition 13, being able to avoid property tax reassessment; plus the positive affect Prop 13 has on local CA government – bearing in mind robust tax revenues pouring into local government coffers since Proposition 13 was passed.

Unfortunately, these folks in the California real estate business will simply have to continue riding the merry-go-round affecting the real estate market, with up-and-down sales cycles.  Let’s face it, they have had their mega profitable bull years, and now they’ll just have to learn how to cope with a bear market for a few years.

And pinning the blame on Proposition 13 and Prop 58, as well as blaming  “elderly home owners who don’t wish to put their house on the market”, simply isn’t going to fly. The shrinking numbers of homes becoming available to buy and sell is a natural business cycle.  And that’s just the way it goes.

Proposition 13 & 58 in demand despite critics?  It certainly is…

Click here for more on polling data and the vast popularity of Prop  13 in California, among middle class and upper middle class home owners of all ages…

With so many property owners inheriting property taxes – yet urgently needing to transfer parents’ property taxes so they can keep parents property taxes the way they are, and not fall prey to egregious tax increases. Hence, that 65% to 70% approval for Proposition 13 in California will only go up, and up, as the  reality of the real job market and the real job-based economy in general becomes clearer and hits home, in stark direct contrast to the sunny unrealistic TV news stories people are subjected to every night on CNN and MSNBC and network news,  citing the “strongest economy is 50 years!” while ignoring the millions of under-employed people with PHD’s waiting on tables and bar-tending…

Or, we’re forced to listen to uninformed politicians  breathlessly decrying the “lowest unemployment numbers in decades”, based solely on how many people are signing up for unemployment checks, while completely ignoring the millions of workers no longer receiving unemployment checks, who have fallen into the cracks and disappeared off the grid.

Perceiving all this realistically, and personally experiencing the ups and downs of real estate in one of the key property states in the union, middle class Californians realize the importance of saving every dollar they can – and this is where Proposition 13 and Prop 58 and 193 step in and provide such critical, often life-saving, support in this regard.

Please feel free to provide your thoughts below.  We are always interested in your comments and ideas, and will continue to publish your interesting feedback: