Proposition 13

Origins of Proposition 13

Preceding Proposition 13, local governments (counties, cities, and special districts), and school districts had far greater freedom to tax property within their jurisdiction to pay for the provision of local services [Page 564]that arguably benefited the jurisdiction's property owners. Using a house as an example, the annual revenue raised from such a property equaled the property tax rate levied upon it (per dollar of market value) multiplied by the market value of the house and its land. The upside of such a system is the ease of accommodating citizen demand for a greater provision of local services within a jurisdiction. Furthermore, a clear nexus exists between having property owners within a jurisdiction pay for local government services that yield higher property values. However, this system of property taxation is not without its concerns: (a) Fairness requires an accurate assessment of market value across properties and classes of property, (b) jurisdictions take in increased property tax revenue (and hence citizens get greater government services) through market value increases of property without having to explicitly ask for a property tax rate increase, and (c) it takes only a simple majority of voting residents to impose their desired level of property taxation upon others. Ultimately, these concerns were responsible for the 1978 passage of California's Proposition 13.

The roots of Proposition 13's passage go back to the 1960s and widespread scandals regarding the accurate determination of the market value of California property for taxation purposes. Statewide legislation passed in 1967 (Assembly Bill 80) addressed these inaccuracies but with the consequence of raising the share of property tax payments made by residents relative to business (the direct result of a previous underassessment of residential to business property). Furthermore, the 1974 election of Governor Jerry Brown compounded this situation after he implemented his campaign promise of bringing further growth controls and environmental protections that resulted in a reduction of new home construction concurrent with continued growth in California's population and high rates of general inflation. As a result, the nominal value of the average California home between 1974 and 1978 nearly tripled. Given the absence of local citizen movements great enough to reduce significantly the rate of property taxation through local elections, jurisdictions throughout California gained windfall increases in local property tax revenues. The payment of these windfalls fell disproportionately upon homeowners. Between 1975 and 1978, the proportion of statewide local property taxes paid by homeowners rose from 32% to 42% in California. Concurrently, the state enjoyed its own revenue windfall due to inflation-based income bracket creep in its highly progressive income taxes. Furthermore, in a series of three (1971, 1976, and 1977) California Supreme Court cases involving Serrano v. Priest, California's system of public K–12 education (which relied heavily on the use of local property taxes to fund widely disparate levels in spending per pupil) was declared in violation of the state's constitutional guarantee of equal protection in the provision of primary and secondary education.

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