California’s Proposition 13 was enacted in 1978 to stem an immodest rise in real property taxes. It mandated a limit of 2 percent annual increase in the value of property for tax purposes. For those who owned property before March 1975 the base value was rolled back to the value on that date. For subsequent owners the base was the value at the time of sale, essentially full market value.
I was a pre-1975 owner and over the course of 31 years realized savings of at least $50,000 in property taxes. But I voted against Prop. 13 and would do so again. Why?
Before Prop. 13, real property was taxed at its assessed value, a standard changeable by political whim. However the tax rate on a residence was lower than that on a commercial property. When valuations and rates rose in the early ‘70s, “tax reform” was demanded.
Tax reform is often a scheme to transfer the tax burden from those of greater wealth to those of lesser wealth. Prop. 13 accomplished this through its disingenuous pitch to “equalize the unfair disparity” between residential and business rates by taxing all properties at 1 percent; that is, by reducing the business rate to 1 percent. In addition, business sales and mergers can proceed within a shell corporation without changing the deed so that March 1975 base values remain locked in despite actual ownership.
What avoided notice also is that, on average, homeowners move every seven years while business locations do not change for decades. Thus in the California market, homeowners’ taxes rose based on escalating resale values while business’ real taxes rose only within the 2 percent annual limit.
With most businesses and sedentary homeowners as factored out, income for essential city services and cultural support plummeted. Quality of life never recovered. One improbable result was that at the time I left California my real estate taxes were in the mid-hundreds while buyers of some recency were paying up to 10 times the amount for the privilege of being my neighbor.
So why did I vote against what seems now to have been my own interest? I voted for Prop. 8 proffered by then-Gov. Jerry Brown. It too would have rolled back property tax bases and limited increases, but would also have preserved the mandate of government to the governed and prevented businesses from avoiding payment of their civic share. But with millions of dollars of ads blitzing the media with outrageous deceptions, 8 lost and 13 won.
A lesson for the here and now: Assessed values have been finagled, fair market values rise and there are calls for legislation to change the tax rates. Be wary. Be very wary.
Cyril L. Greig lives
in Oak Harbor.