In 1978 voters approved Proposition 13. Here are the basics to the voter approved initiative.
1. One Percent Rate Cap.
Proposition 13 capped, with limited exceptions, ad valorem property tax rates at one percent of full cash value at the time of acquisition. The assessed value of the property may only increase by 2% until and unless there is a change of ownership.
2. Assessment Rollback.
It rolled back property values for tax purposes to their 1976 level.
3. Responsibility for Allocating Property Tax Transferred to State.
Proposition 13 gave state lawmakers responsibility for allocating property tax revenues among local jurisdictions. Prior to Proposition 13, jurisdictions established their tax rates independently and property tax revenues depended solely on the rate levied and the assessed value of the land within the agency’s boundaries.
4. Reassessment Upon Change of Ownership.
Proposition 13 replaced the practice of annually reassessing property at market value with a system based on cost at acquisition. Prior to Proposition 13, if homes in a neighborhood sold for higher prices, neighboring properties might have been reassessed based on the newly increased area values. Under Prop. 13, the property is assessed for tax purposes only when it changes ownership. As long as the property is not sold, future increases in assessed value are limited to an annual inflation factor of no more than 2%.
5. Vote Requirement for State Taxes.
Proposition 13 requires any measure enacted for the purpose of increasing state revenues to be approved by a two thirds vote of each house of the legislature.
6. Voter Approval for Local “Special” Taxes.
Proposition 13 requires taxes raised by local governments for a designated or special purpose to be approved by two-thirds of the voters