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California Commentary

We're thankful that Proposition 13 protects Californians

By Jon Coupal

We have much to be thankful for this year. One of those things is the defeat of Proposition 5, which would have made it easier to raise property taxes. Affecting homes, apartment buildings and commercial real estate, Prop. 5 would have burdened Californians with a higher cost of housing and a higher cost of living. We can all be grateful that voters resoundingly said no to that.

It is also a good reminder of why we Californians should be thankful for Proposition 13, the 1978 initiative that put sensible limits on increases in property taxes and put those limits into the state constitution.

Prior to Proposition 13, property taxes were out of control. The tax rate throughout California averaged 2.67% of assessed value, and the assessed value was regularly updated to match current market value. As inflation and market factors pushed property values higher and higher, homeowners received property tax bills based on their "paper profits," with no limits on annual increases.

Some properties were reassessed 50 to 100 percent higher in just one year, so their owners' tax bills skyrocketed, often beyond the homeowners' ability to pay. In one year in Los Angeles County alone, 400,000 people had not paid their property tax because they didn't have the money, running the risk of being forced out of their homes.

Retired people on fixed incomes were among the hardest hit. Many had paid off their mortgages yet faced losing their homes because they couldn't afford the annual property tax bill. Then, just as millions of Californians were at risk of being driven out of their homes, Howard Jarvis gathered more than 1.5 million signatures to qualify a statewide initiative that would finally end excessive taxation and protect the security of property ownership -- Proposition 13.

An overwhelming majority of Californian voters voted for Proposition 13 despite a campaign of scare tactics. It turned out that nothing scared Californians more than opening their property tax bill.

Proposition 13 made property taxes predictable and manageable.

First, Prop. 13 cut the property tax rate from a statewide average of 2.67% down to 1%. To this day, even new homeowners are saving money compared to what they would have been paying. Check out the Howard Jarvis Taxpayers Association's calculator at GuessingGame.org for a look at how much you'd be paying in annual property taxes if Prop. 13 had never passed.

Second, it limits the annual increase in assessed value to the rate of inflation, capped at 2%. Under Prop. 13, even if a property doubles in market value in a single year, its "taxable value," against which the assessor applies the 1% tax rate, can only be increased a maximum of 2% per year.

Third, Prop. 13 requires reassessment of property when it changes hands. This provides local governments with a stable and predictable source of tax revenue, which has grown virtually every year since 1978 in percentages that exceed inflation and population growth.

Proposition 13 also protected taxpayers by requiring a two-thirds vote of the state legislature to raise taxes and by giving Californians the right to vote on local tax increases, with a two-thirds vote required to pass certain tax hikes.

The two-thirds vote is particularly critical when it comes to property taxes. Because people can lose their homes if they can't pay the property tax bill, the vote threshold must be higher than a simple majority of voters, many of whom are voting on a tax they won't personally have to pay, at least not directly. It's this two-thirds protection that Proposition 5 attempted to destroy.

It's hard enough to pay the bills in this state without politicians trying to raise taxes in every election. We're thankful that Proposition 13 protects Californians, every day.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.

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Jon Coupal is the President of the Howard Jarvis Taxpayers Association. He is a recognized expert in California fiscal affairs and has argued numerous tax cases before the courts.

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