The Problem: Out-of-Control Property Taxes
In the 1970s, families, seniors and small businesses were faced with the possibility of losing their properties because they couldn’t afford 50-100% increases in their property taxes every year. Unpredictable property tax bills skyrocketed, often beyond owners’ ability to pay. As a result, many families were forced from their homes and small businesses were left with no choice but to raise prices on their customers.
The Solution: Creating Certainty Through Prop 13
California voters overwhelmingly passed Prop 13 in 1978 to bring certainty to residents and businesses, allowing them to afford their property tax bills in the future. Prop 13 gives every Californian who buys a home confidence that they will not be forced out of their home later in life due to rising property taxes and every business certainty what their taxes will be so they can keep their doors open, meet payroll and continue to grow. Specifically, Prop 13:
- Calculates general property taxes for residential and business properties based on 1% of their purchase price
- Caps annual increases in property taxes at 2% per year, which prevents sharp increases in property taxes, especially when property values rise quickly
- Requires that local special tax increases be approved by voters with a two-thirds vote
- Requires that state tax increases be approved by a two-thirds vote of each house of the Legislature
Who Benefits From Prop 13?
Prop 13 benefits homeowners, renters, small businesses and all Californians by preventing skyrocketing increases in property taxes that get passed along to tenants and consumers in the form of higher rent and higher costs for goods and services.
Renters and Homeowners Benefit.
Prop 13’s limits, combined with current assessment practices, on average saved homeowners an estimated $13,700 and renters $4,400 in 2017. Prop 13 keeps property taxes affordable and prevents rents from rising even higher, making California’s housing crisis even worse.
Small Businesses Benefit.
Many small businesses lease their stores, offices, and shops. Without Prop 13’s protections, property owners will simply pass along higher property taxes to small businesses by raising rents – cutting into their ability to stay in business and increasing costs for all of us as small businesses pass along these higher costs.
Low-income Families Benefit.
Prop 13 makes homeownership easier to attain for low and moderate-income families. For many, homeownership is the primary path to building wealth and upward income mobility. Prop 13 also helps families save for retirement and plan for the future.
All Californians Benefit.
Prop 13 prevents property tax bills from skyrocketing, increasing costs for all of us. In addition, Prop 13 prevents higher state taxes without a two-thirds vote of the Legislature and prevents local governments from enacting special taxes without a two-thirds vote of the people. Without Prop 13, higher property taxes will result in paying billions more for rent, housing, groceries, utilities, restaurants, prescriptions, clothing, day care, health care and even gas – just about everything we buy or use will cost more!
Prop 13 Provides a Reliable and Growing Source of Revenue.
Prop 13 provides stability to the increasingly volatile tax structure in California. According to Board of Equalization data, property tax revenues grew from $5 billion in the year following Prop 13’s approval (1978-79) to $66 billion in 2017-18, an average of 6.9% annually. In fact, property tax revenues grew faster than overall growth in the economy, as measured by personal income growth at just 6.1% during this same period.