The Facts About the Proposed Prop 13 Overhaul

If you frequent Facebook and other social media, you may have come across a shared post stating that “major property taxes are on the launch pad as California politicians try to repeal prop 13 by slipping it under the radar.” The post claims that Attorney General Xavier Becerra “has strategically relabeled it [Prop 13] Education and Local Government Funding” and that the impending ballot measure will be worded in a way that is misleading, virtually guaranteeing California voters will unwittingly support the repeal of their property tax basis. Here’s the history of Prop 13, along with facts about the proposed Prop 13 overhaul.

History of Prop 13

In 1978, a landmark tax measure was passed by Californians. Proposition 13, or the People’s Initiative to Limit Property Taxation, maintains a property tax rate for all residential and commercial property at 1% of the purchase price per year with a maximum of a 2% increase (for special local assessments.)

Prop 13 prohibits the reassessment of a new tax basis except when:

  1. The property changes ownership
  2. It has undergone construction, adding to its market value

The primary contributing factor to the passage of Prop 13 was a concern that older homeowners on fixed incomes could be priced out of their residences due to ever-increasing property taxes.

Though critics have complained that California loses millions every year thanks to property that doesn’t change hands and thus never gets reassessed, the measure has been an untouchable “third rail” for over 40 years, with politicians not daring to make changes without facing incredible backlash.

The Reality

According to a January 7, 2020 article on abc10, there is an initiative that will be on the November 2020 ballot called “The California Schools and Local Communities Funding Act of 2020.”

California Secretary of State Spokesperson Sam Mahood has stated that, “The California Schools and Local Communities Funding Act would require that certain commercial properties are taxed at fair market value.” As such, this proposed initiative would undo Prop 13 property tax caps for commercial and industrial properties only. This initiative would NOT take away the Prop 13 protections for homeowners and their residential properties.

The suggested ballot measure is specifically focused on alter how property taxes are determined for commercial and industrial-zoned property, allowing them to be taxed at the full market rate.

The reasoning behind this initiative is to bridge the state’s funding gap, directing those monies to schools, community colleges and local communities and to encourage small businesses and start-ups. (Findings Section 2, Part a) The measure references in Section 2, part g a study by USC that found “under-assessed commercial and industrial property allows owners to avoid over $1.1 billion in local property taxes each year that should be going to support our schools and local communities.”

In Section 3, Purpose and Intent, part a, the measure reads, “It is the intent of the People of the State of California to…preserve in every way Proposition 13’s protections for homeowners and for residential rental properties.”

Many of us initially are exposed to news and information on social media, much of which is not trustworthy. We encourage you to seek out credible sources and details on this ballot measure so you can be properly informed.

If you have questions or concerns about this November 2020 ballot initiative, please feel free to reach out to me, or write or call your local Representative. The California Secretary of State website is also a good resource to crosscheck information.

The Dawn Thomas Team guides nice people through Silicon Valley real estate matters. Our mission is to help everyone find their place in this world. Contact us today and we can assist you in selling or buying your home.