Busting the myth that Prop 13 eviscerated local tax revenue

The year 1978 might seem like ancient history – a distant memory for most voters, and unimaginable for a growing class of policymakers who were not yet born then. With the passage of time, folklore prevails and myths sometimes come to overshadow facts. It is in this light that opponents of Proposition 13 have made many false claims about the landmark property tax reform initiative.

One of the often-cited claims by opponents of the 1978 ballot measure is that “Proposition 13 eviscerated local revenue.” Nothing could be further from the facts. Data shows that since 1978, local property tax assessments in California have increased by 856.48 percent.

This year alone, local property tax assessments are expected to increase an average of 5.5 percent statewide, amounting to billions of dollars in additional funding for local schools, libraries, fire and police departments, parks and recreation programs, public health programs, streets and transit.

Sonoma County alone has seen 5.50 percent growth in the total assessed value of properties subject to local income tax. In comparison, Napa County’s assessment roll grew 6.68 percent, and Solano County’s grew 5.83 percent.

While Proposition 13 limits property taxes to 1 percent of a property’s assessed value, and caps how fast taxes can increase each year, the aggregate revenue growth has been substantial.

Proposition 13 protects property owners by capping the growth of a property’s assessed value to 2 percent per year, absent a change in ownership or new construction. The point that many critics of Proposition 13 fail to account for is that aggregate figures are much higher than 2 percent. Only in the depths of the state’s worst recessions (1994-1996 and 2009-2012) have Proposition 13 property taxes failed to grow more than 2 percent per year.

In fact, the growth of property tax assessments has far outpaced inflation and changes in California’s population. Since passage of Proposition 13, assessments have grown at an average rate of about 7.07 percent per year. In contrast, inflation has grown at an average annual rate of 3.57 percent, and population has grown at an average rate of 1.43 percent.

What most people remember from the pre-Proposition 13 period is the public outrage, as property tax assessments were skyrocketing as much as 15 percent from one year to the next, based on such things as the sale price of your neighbor’s house.

Instead of setting your property tax based on factors out of your control, Proposition 13 bases the property tax on acquisition value – usually the purchase price, an objective standard that generally is not disputed – plus 2 percent per year. The cap ensures that even as the aggregate property tax assessments grow, individual taxpayers are protected.

Discussions about Proposition 13 should not be framed by myths and misleading statements. To evaluate Proposition 13, tangible data from state and local sources must be used to inform the debate.

Love Proposition 13 or hate it, the data shows that it has provided a stable and growing source of revenue for local government that has far exceeded inflation

Robert Gutierrez, Director of the California Tax Foundation