Proposition 13 – 34% Against Versus 62.6% For
On June 6, 1978 Proposition 13 passed as a property tax relief measure with 4,280,689 votes for – versus 2,326,167 votes against. In the final analysis, it came down to finally taking a great deal of power away from the County Tax Collectors; and giving it back to taxpayers!
Howard Jarvis and Paul Gann, were the best known Proposition 13 advocates. Officially known as the “People’s Initiative to Limit Property Taxation”, also referred to as the Jarvis-Gann Amendment, Proposition 13 was listed for voters through the so-called “California ballot initiative process” – which allows a constitutional amendment to be offered to voters when political advocates assemble a certain number of signatures on a petition.
For Once, Tax Relief for the Middle Class in California – Not Special Interests
Many people aren’t aware of the fact that Mr. Jarvis was a hugely successful residential apt. building owner, and Mr. Gann, a political activist who passed away from HIV due to infected blood from a unfortunate transfusion, who ironically devoted the last several years of his life to AIDS treatment advocacy – in direct opposition to his fellow conservatives. California’s “Paul Gann Blood Safety Act” was passed into law in 1990, mandating that doctors discuss the risks of blood transfusion with their patients.
Two non-politicians named Howard Jarvis and Paul Gann courageously soldiered on – without precedence – until they won the day. This rarely occurs in political circles, as we all know. But for once, some non-politicians actually changed things for the better in California. And virtually overnight, once Howard Jarvis and his so-called “Tax Revolt” passed Proposition 13, property tax rates in California finally became predictable and equitable – from San Jose to San Francisco and beyond, in all 58 counties.
Under this new property tax relief measure, the property tax rate is now set at a uniform 1% throughout the state, and property tax increases are limited to no more than 2% a year as long as the property is not sold.
Previously, the tax rate in California averaged almost 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% higher in just one year, so property owners’ tax bills skyrocketed, often way beyond homeowners’ ability to pay their property taxes.
Now, once sold, property is reassessed at 1% of the new market value (usually the sales price) with a 2% cap on annual tax increases. As a result, new buyers are always aware of what their taxes will be and know the maximum amount property taxes can increase each year for as long as they own the property.
Then, in 1986, Amendment Proposition 58 was passed; and homeowners as well as beneficiaries inheriting property from parents could happily take advantage of a transfer of property between siblings or sibling-to-sibling property transfer in conjunction with an irrevocable trust loan, typically for buying out inherited property shares from siblings, while keeping a low property tax base (now used with California Proposition 19 which has replaced Proposition 58).
Overnight, beneficiaries could transfer parents property taxes when inheriting property taxes; and could keep parents property taxes after a property tax transfer made possible by a parent-child transfer, officially a parent-to-child exclusion which, exactly like buying out inherited property shares, is also now governed by Proposition 19.
Benefits for Non Property Owners
While Proposition 13 is mainly famous for capping property taxes in California, it also stops arbitrary tax hikes at the state and local level. It makes sure that any state tax increase had to be approved by a 2/3 majority in the Legislature, and any new or increased local taxation must be approved by voters, not just a collection of special interest politicians.
Supplemented by Howard Jarvis Taxpayers Association – a co-sponsored tax measure entitled Proposition 218 (the Right to Vote on Taxes Act) makes sure that voter approval of all new local taxes is required, no matter what. So not just property owners, but also renters, benefit – as Proposition 13 stabilizes property taxes, making them predictable and reasonably controlled; reducing any uncontrolled or unexpected rent increases throughout the state of California.