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Background: On June 6th, 1978, nearly
two-thirds of California's voters passed Proposition 13, reducing property tax
rates on homes, businesses and farms by about 57%. Now, according to the newly
amended state constitution , property tax rates could not exceed 1 percent of
the property's market value and valuations couldn't grow by more than 2% per
annum unless the property was sold.
Prior to Proposition 13, the tax rate
throughout California averaged a little less than 3% of market value, and there
were no limits on increases either for the tax rate or property value
assessments. Some properties were reassessed 50% to 100% in just one year and
their owners' tax bills jumped correspondingly. Under the tax cut measure,
property tax valuation was set at the 1976 assessed value. As stated above,
property tax increases on any given property were limited to no more than 2% a
year as long as the property was not sold. Once sold, the property was
reassessed at 1% of the new market value with the 2% yearly cap placed on this
new assessment. Thus, the new buyer is aware of what the taxes will be and
knows the maximum amount property taxes can increase each year for as long as
he or she owns the property.
Features of Proposition 13:
1. One percent rate cap. Proposition 13 capped,
with limited exceptions, property tax rates at one percent of full cash value
at the time of acquisition. Prior to Proposition 13, local jurisdictions
independently established their tax rates and the total property tax rate was
the composite of the individual rates.
2. Assessment rollback. Proposition 13 rolled
back property values for tax purposes to their 1975-76 level.
3. Responsibility for allocating property tax
transferred to the state. Proposition 13 gave lawmakers responsibility for
allocating property tax revenues among local jurisdictions. Prior to
Proposition 13, jurisdictions established their tax rates independently and
their property tax revenues depended on the rate levied and the value of the
property located within the jurisdiction's boundaries.
4. Reassessment upon change of ownership.
Proposition 13 replaced the practice of annually reassessing property at full
cash value with a system based on cast at acquisition. Under Proposition 13,
property is assessed at market value for tax purposes only when it changes
ownership. Increases in value are limited to an annual inflation factor of no
more than 2%.
5. Vote requirement for state taxes.
Proposition 13 requires any measure enacted for the purpose of increasing state
revenues to be approved by two-thirds vote of each house of the
legislature.
6. Voter approval for local 'special' taxes.
Proposition 13 requires taxes raised by local governments for a designated or
"special" purpose to be approved by two-thirds of the voters.
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