Proposition 13 Ongoing Tax Relief for California Homeowners… Preserving Parent’s Tax Base; But – for Middle Class, or Wealthy Families?

California Proposition 13 ongoing tax relief limits on “assessed value growth” of real property actually maintains ongoing reductions in real estate taxes for homeowners in California. This is basically due to the fact that the market value of most real property in California increases at a faster rate than 2% per year. Therefore, under Proposition 13, the tax rate imposed on most real estate in California winds up being lower than the true market value.

Moreover, under Proposition 13, the longer a home is owned, for example, the more a California property owner benefits – as homeowners continue to pay lower property taxes than they would if their property taxes were based solely on market value… as it would be without the affect of Proposition 13. In California, it’s estimated that 60,000 to 80,000 residential and commercial properties pass from parent(s) to children (frequently elderly parents to their grown children) with additional relief from Proposition 58 – avoiding conventional property tax reassessments, that traditionally use updated property reevaluation to reassess value, and subsequently impose increased property taxes.

As a matter of fact, interestingly enough, from its’ inception in 1978, California Proposition 13 ongoing tax relief has been a tool actually designed to protect elderly homeowners from sharply rising property taxes; and this affects both middle class, upper middle class and extremely affluent property owners. More information on Proposition 13 can be found by clicking here.  Even though some politically motivated folks in California claim that Proposition 13 and Proposition 58 exist as financial tools  mainly to enable wealthy homeowners in California to transfer family wealth to yet another generation… and that across the board, wealthy families benefit the most from Proposition 13 in particular.

In fact, it’s actually common knowledge that many middle class families benefit from California Proposition 13 ongoing tax relief on property, and Proposition 58 regarding property transfers, which you can investigate further by clicking here… The idea that specifically Proposition 13 mainly favors the wealthy is, frankly, an inaccurate assumption. As a matter of fact, the Legislative Analyst’s Office in California has stated that around two-thirds of all Proposition 13 property tax relief goes to folks with yearly incomes in the $80,000 plus range, with most of that property tax relief going to homeowners with incomes in $120,000 plus range.

If we sit back and ponder those numbers for a moment, most of us would agree that incomes in the $80,000 plus per year, up to $120,000 plus, even into the $150,000 or $175,000 to $200,00 per year range (prior to income tax) is not exactly what most of us would classify as “wealthy”.

If we factor in these statistics, most of the homeowners benefiting from Proposition 13 would actually appear to be solidly middle class to upper middle class – depending on the area they live in. Naturally, the more affluent the area, the more modest one’s income range looks, in practical terms. Yet regardless of where homeowners reside, the bulk of people benefiting from the Proposition 13 tax solution are still what most of us would classify as “middle class”. No matter how much politicos manipulate the statistics underlying this issue, you simply cannot classify the bulk of these homeowners as “mostly wealthy”… as some folks claim they are.

For example, if California homeowners living in areas like Palo Alto, Santa Barbara, Malibu, Laguna Beach or Beverly Hills pay less property taxes than folks living in less affluent areas, for instance such as Beaumont, Arvin, Palmdale or Lancaster – this is in fact not due to their supposed wealth, since statistics tell us repeatedly that they are solidly in the 5 to low or even mid 6-figure range at best. And it is hardly some nefarious political plot to provide the more affluent residents of those areas with lower property tax rates through Proposition 13 tax reduction; while intentionally keeping middle class and lower middle class homeowners at higher property tax rates.

In reality, this income issue appears to be mainly due to higher net worth homeowners simply taking better advantage of a tax solution like Proposition 13 – while many less affluent residents in more middle class areas do not. Quite honestly, it really appears to be as simple as that… Therefore, we felt it was worthwhile to set the record straight on this simple, but important, distinction.


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