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California Tax Data
 
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History of Taxation •
Proposition 13
Property taxes in the state of California have been the subject of controversy for as long as the state has assessed taxes.  Before Proposition 13 passed in 1978, property taxes could increase dramatically from year to year based on the assessed value of the home.  During the seventies, the real estate market experienced dramatic growth and we all witnessed the rapid escalation in the value of our homes.  Because assessors were required to keep assessed values current, property taxes were skyrocketing at a substantial rate.  However, increases in the assessed value were not made every year thus resulting in a major tax jolt for homeowners every few years.  Since the passage of Proposition 13, a couple of things have happened.  The property tax rate was set at a 1% cap.  This means that the amount in property taxes you have to pay can only be up to 1% of the assessed value of your home.  The assessed value of homes cannot exceed the 1975-76 assessed value and can increase based on the Consumer Price Index (CPI) by no more than 2% per year.  If a transfer of ownership takes place or improvements are made, the property will be subject to a reassessment at the current market value.  The newly assessed value will then increase on a yearly basis not to exceed 2% per year.  The decrease in property taxes as a gross percentage of the assessed value of homes has forced local agencies (cities, counties, and other special districts) to find other sources of funding.  These local agencies were given more authority to levy local non-ad valorem property taxes as a result of the passage of Proposition 13; however, the “special taxes” must be approved by two-thirds of the voters.  Proposition 13 was intended to protect taxpayers from unanticipated increases in property taxes, to provide effective tax relief, and to require voter approval of tax increases.
 
Proposition 218
Over time, bureaucrats would find ways of taxation that ultimately circumvented the requirements of Proposition 13.  Local governments have subjected taxpayers to excessive tax, assessment, fee and charge increases that have frustrated the purposes of voter approval for tax increases.  As a result of the increasing methods by which local agencies have collected revenue from taxpayers without their consent, Proposition 218 was initiated.  Proposition 218 (Article XIIID of the California Constitution) is cited as the “Right to Vote on Taxes Act”.  It is an expansion of the people’s initiative power.  Under Proposition 218, assessments may only increase with a two-thirds majority vote of the qualified voters within the District.  In addition to the two-thirds voter approval requirement, Proposition 218 states that effective July 1, 1997, any assessments levied may not be more than the costs necessary to provide the service, proceeds may not be used for any other purpose other than providing the services intended, and assessments may only be levied for services that are immediately available to the property owners.  The measure also specifies that before increasing an existing assessment, local governments must mail information about the levy to every property owner within the District, reject the increase if a majority of the property owners protest in writing, and hold an election on the levy.
 
What Now?
It seems as time goes on, there will inevitably be some measures attempting to inflate property taxes to fund one thing or another.  In fact, just recently Californians defeated the initiative (Proposition 26) that would have stripped the two-thirds supermajority requirement for issuing local general obligation bonds and raising property taxes for school construction.  If this initiative had passed, it would have dismantled the 120-year-old constitutional protection that requires a two-thirds vote and would allow school bonds to pass with a simple majority vote.  The victory for taxpayers came despite a 20-1 spending advantage by the Proposition 26 campaign over it’s opponents.  There is already another initiative in the working to allow state taxes to be raised by the Legislation with a simple majority instead of the current two-thirds requirement.  Property taxes are unavoidable.  If you own property, you will pay the taxes.  Overwhelming as they may be, understanding them shouldn’t be an issue.