Proposition 13, also known as the People’s Initiative to Limit Property Taxation, was an important amendment to California’s constitution in 1978 because, its purpose was to limit California’s tax rate on real estate.
Thanks to Proposition 13, property taxes are unable to increase at more than 2% per year for existing homeowners. Only when the home is sold, can taxes be increased by more if the property value deems it.
The Third Rail
Before the passage of Proposition 13, older Californian’s faced the prospect of being taxed or pushed out of their homes because, their homes values were being assessed at higher values every single year and many homeowners could no longer afford to pay their property taxes. Anyone who has owned a home during one of the state’s many booms knows that home values can increase double digits each year.
Once Proposition 13 was passed, older homeowner could enjoy their retirements without having to worry about shouldering a huge property tax burden.
Since its passage, Prop 13 has enjoyed long time support but, in these economically challenging times, many lawmakers in California are eager to change Proposition 13 including Tom Ammiano, a Democratic Assemblyman from San Francisco who wants to change this Proposition so business owners in the Golden State will pay more money in property taxes.
An Uphill Battle?
Tom Ammiano may face an uphill battle with changing Proposition 13 because, thanks to the latest poll by California’s Public Policy Institute, we know that almost 60 percent of voters in California favor not changing Proposition 13 across the board. However, they do favor a new property tax rate called “split roll” where commercial property owners would pay more per year after their buildings were reassessed current market values.
When it comes to residential homeowners, California tax payers favor capping property taxes at an annual increase of just 2 percent.
Regardless of what happens with Proposition 13 one thing is clear, more tax revenue will be needed in California this year to avoid another shortfall in the state budget. But is changing Prop 13 a good idea for California businesses? While the answer remains to be seen, what we do know is that businesses have been leaving the state in recent years, and we do need more revenue and jobs.
To learn more about Proposition 13 or to view the latest Orange County homes for sale, contact the team of top Orange County Realtors at Fred Sed & Associates today by calling (949) 272-0125.