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Passed in 1978, Proposition 13 slashed property tax rates statewide. 40 years ago, when CA’s voters approved Prop 13, homeowners and other landowners immediately realized a massive savings: $7 billion. Since then, that number has more than quadrupled. A new report out this week revealed that homeowners will save roughly $30 billion in 2018 thanks in large part to Prop 13. In L.A. County alone, those savings will amount to more than $7.4 billion.
Under Prop 13, the longer homeowners have owned a residence, the more they save on annual tax payments. Since its passage, it has limited property tax payments to 1% of a property’s assessed value, plus a small percentage used to pay off voter-approved bond measures. The taxable value of a property is also locked in once it changes hands and can only rise 2% annually.
Critics of Prop 13 argue this kind of disparity is one of the measure’s greatest failings: It disproportionately benefits homeowners in wealthy communities where land values have soared since passage of the initiative. Supporters counter that the measure’s limits on tax increases makes it easier for buyers to calculate payments down the road and make financial plans for the future.
California voters will soon decide on a pair of measures that could restructure some of Prop 13’s key provisions. Proposition 5, which will appear on ballots on Nov. 6, would allow homeowners over the age of 55 and those with a severe disability to take their property tax savings with them when buying a new residence. A separate initiative has qualified for the 2020 ballot and would end Prop 13 benefits for large commercial businesses, but leave in place savings for farmers, small businesses, and homeowners.
As always, the path to change is to vote.