Your Home's Value and Property Taxes

By Sheryl Landrum
Home Worth Columnist

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It has been thirty years since California voters passed Proposition 13, the landmark decision that determined that home property taxes would be based on the purchase price of a house and also capped how much property taxes could increase each year. Almost every year since that time, bills have been submitted before Congress to change it. Proposition 13 definitely has had its critics over the years and its supporters. What are the issues surrounding each?

Critics Say Lost Homeowner's Tax Dollars Hurt the State Economy
States are generally the advocates to repeal tax laws such as Prop 13, asserting that needed tax dollars are lost and that schools and state-funded services suffer for it. Prior to the passage of Proposition 13 in 1978, property taxes were based on the current value of a home; if the house value increased, so did the amount of property tax the state could collect. When Prop 13 passed on June 7, 1978, property and home values returned to 1975 levels, resulting in a 45.2 percent reduction in tax receipts. California's tax repercussions were almost immediately evident. First, there was a cut back in free and state-funded programs; then new fees and charges were initiated to offset the rollback in tax receipts.

Does the Homeowner's Gain Offset the State's Tax Loss?
Others say "baloney" to the state's claim that schools and state services are suffering due to Prop 13. In California between 1980-1981 and 2005-06, property tax revenue skyrocketed from $6.4 billion to $38.3 billion…an increase of more than 500 percent. Not only has the state not suffered from a loss of income, but numerous homeowners have been able to stay in their homes because of it.

Remember, Proposition 13 was designed to help those on fixed incomes stay in their homes and not lose them to increased valuation and the resultant increase in property taxes. If you are buying a California home this year, your property tax base will be approximately one percent of the purchase price. This will be your tax base until you sell your house.

For those looking at retirement, or trying to plan and budget for the future, knowing property taxes are set can make a difference between security in the future or insecurity about what lies ahead. Homeowners who bought houses in the past few years when home prices skyrocketed should contact their local assessor's office to see if they might be eligible for a reduction in the home's assessed value and therefore property taxes.


Source: Propositions 13's Influence Monumental 30 Years Later and Lucky 13, The San Diego Union Tribune, Friday, June 6, 2008.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage of San Diego at the Prudential Realty Office in Bonsall, California.