Part Two: Why are Proposition 13 & Prop 58 Critical to Californians?

Before Proposition 13 was passed by voters on June 6, 1978, average tax rates in California were close to 3% of market value, without any guardrails as far as property tax or property value assessments were concerned.  This is why Prop 13 & Prop 58 are critical to Californians.

In fact, right before Proposition 13 was passed, things has gotten so bad that there were homes being reassessed by fifty percent… to a hundred percent from one year to the next, literally within a 12-month time-frame. Home owners’ tax liabilities were going through the roof! So much so, that many middle and even upper middle class property owners were actually unable to pay the tax hit on their home consistently every year.

Folks who resided in California at that time, and still live in California to this day, tell us that you could see the anxiety and fear etched into the faces of property owners all across the state. There was no predictability, regarding property taxes, from year to year. People never knew what increases would be eating into them from year to year.

There was a point, before 1978, when these tax-increase issues were so severe and problematic, that over 400,000 home owners in LA County were actually not able to pay their property taxes due to particularly egregious tax increases. With many people coming very close to losing their homes, and some literally losing their primary residence where they have lived for years; many for decades, such as elderly Californians, who were particularly badly affected.

Many seniors were free of mortgage debt, and yet were forced out of their home because they couldn’t afford to pay their property tax… and many became literally sick with anxiety and worry over the fear of losing their home.

Millions of Californians were on the edge of that cliff, facing the catastrophic loss of their home to the taxman. It was around that time, in the late 1970s, when things had gotten so bad that home owners were urgently looking around for some sort of solution to all this instability and fear that was basically ruining their lives… when a knight in shining armor appeared… and all he needed to fit the mold of hero was the white horse. This man breezed past the taxman, refusing to be intimidated, as he gathered support for a solution to this disastrous situation – and assembled over one and a half million signatures on a petition.

That knight in shining armor was Howard Jarvis who, with his Taxpayer’s Association, helped generate literally hundreds of thousands of signatures, and qualified for a statewide initiative that would finally end “excessive taxation” and would finally provide an initiative to create security and predictability for California home owners. And that initiative was called California Proposition 13, which remains vastly popular across the state, to this day.

Interestingly enough, Prop 13 has also spawned the wildly popular home & land transfer initiative Proposition 58, making parent to child transfer of property more affordable by avoiding  property tax reassessment; i.e., parent to child exclusion; with respect to  property tax transfer – allowing adult children/beneficiaries to transfer parents property taxes.  In other words, to keep parents property taxes when inheriting property taxes associated with home or land transfer, often as an inheritance.

All which has, in turn, spawned an extremely successful yet small niche trust loan services industry in California, furnishing loans to trusts, specifically loans to irrevocable trusts… spearheaded by trust loan industry leader Commercial Loan Corporation, a trust lender of wide renowned in both southern and northern California. The point being, that the Proposition 59 & Prop 13 initiatives, as well as trust loan services, have all revolutionized residential and commercial real estate in California, and residents will fight hard to maintain that status quo. Because  Prop 13 & Prop 58 are critical to Californians.  Now that they have it, they won’t want to live without it.

It is just unfortunate that the rest of America can’t also enjoy the tax relief benefits stemming from these property tax initiatives  and, ultimately, from California Proposition 13 itself.