Many people see the value of Proposition 13 when they have owned their homes for quite some time. Before Proposition 13 was passed, the average property tax rate in California was three percent of assessed value, and there was no limit on annual increases. People were losing their homes in the late 1970s because if a house on your block was sold more than what you paid for, your property tax bill would be much higher.
WHAT IS PROPOSITION 13?
Prior to Proposition 13, the property tax rate averaged a little less than 3 percent of market value. Also there were no limits on increases for the tax rate. Under Proposition 13 tax reform, property tax value was rolled back and frozen at the 1976 assessed value level. Because of Proposition 13, it made sweeping changes to the California property tax system. It also added features like the one percent rate cap, assessment rollback, responsibility allocating property tax transferred to the state. It also has features like reassessment upon change of ownership, vote requirements for state taxes, and voter approval for local “special” taxes.
The assessment rate is now only one percent for all California property and annual tax increases are limited to no more than two percent. When property is sold it is then reassessed at market value, but the rate remains at one percent and the new owner is then protected by the two percent cap on annual increases.