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California Tax Data
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Tel (949) 240-1520
Fax (949)240-1620
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Proposition 13 |
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| Property taxes in the state of California
have been the subject of controversy for as long as the state
has assessed taxes. Before Proposition 13 passed in 1978,
property taxes could increase dramatically from year to year
based on the assessed value of the home.
During the seventies, the real estate market experienced
dramatic growth and we all witnessed the rapid escalation in
the value of our homes. Because assessors were required to keep
assessed values current, property taxes were skyrocketing at
a substantial rate. However,
increases in the assessed value were not made every year thus
resulting in a major tax jolt for homeowners every few years.
Since the passage of Proposition 13, a couple of things
have happened. The property tax rate was set at a 1%
cap. This means
that the amount in property taxes you have to pay can only be
up to 1% of the assessed value of your home.
The assessed value of homes cannot exceed the 1975-76
assessed value and can increase based on the Consumer Price
Index (CPI) by no more than 2% per year. If a transfer of ownership takes place
or improvements are made, the property will be subject to a
reassessment at the current market value.
The newly assessed value will then increase on a yearly
basis not to exceed 2% per year.
The decrease in property taxes as a gross percentage
of the assessed value of homes has forced local agencies (cities,
counties, and other special districts) to find other sources
of funding. These
local agencies were given more authority to levy local non-ad
valorem property taxes as a result of the passage of Proposition
13; however, the “special taxes” must be approved by two-thirds
of the voters. Proposition
13 was intended to protect taxpayers from unanticipated increases
in property taxes, to provide effective tax relief, and to require
voter approval of tax increases. |
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Proposition 218 |
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| Over time, bureaucrats would find ways
of taxation that ultimately circumvented the requirements of
Proposition 13. Local
governments have subjected taxpayers to excessive tax, assessment,
fee and charge increases that have frustrated the purposes of
voter approval for tax increases.
As a result of the increasing methods by which local
agencies have collected revenue from taxpayers without their
consent, Proposition 218 was initiated. Proposition 218 (Article XIIID of the
California Constitution) is cited as the “Right to Vote on Taxes
Act”. It is an expansion of the people’s initiative
power. Under Proposition
218, assessments may only increase with a two-thirds majority
vote of the qualified voters within the District.
In addition to the two-thirds voter approval requirement,
Proposition 218 states that effective July 1, 1997, any assessments
levied may not be more than the costs necessary to provide the
service, proceeds may not be used for any other purpose other
than providing the services intended, and assessments may only
be levied for services that are immediately available to the
property owners. The
measure also specifies that before increasing an existing assessment,
local governments must mail information about the levy to every
property owner within the District, reject the increase if a
majority of the property owners protest in writing, and hold
an election on the levy. |
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What Now? |
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| It seems as time goes on, there will inevitably
be some measures attempting to inflate property taxes to fund
one thing or another. In fact, just recently Californians defeated
the initiative (Proposition 26) that would have stripped the
two-thirds supermajority requirement for issuing local general
obligation bonds and raising property taxes for school construction.
If this initiative had passed, it would have dismantled
the 120-year-old constitutional protection that requires a two-thirds
vote and would allow school bonds to pass with a simple majority
vote. The victory
for taxpayers came despite a 20-1 spending advantage by the
Proposition 26 campaign over it’s opponents. There is already another initiative in
the working to allow state taxes to be raised by the Legislation
with a simple majority instead of the current two-thirds requirement. Property taxes are unavoidable. If you own property, you will pay the
taxes. Overwhelming
as they may be, understanding them shouldn’t be an issue. |
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