Written by Richard Rider, Chairman of San Diego Tax Fighters
A common misconception is that Proposition 13 protects primarily the “old people”—that the new home buyers gain little benefit from Prop 13. It’s an educational (and scary) exercise to calculate what all California homeowners’ property taxes would be if Prop 13 had not been passed by the voters in 1978—and no subsequent reforms in property taxes occurred (a fair assumption, given Democrat dominance of both houses of the California State Legislature since 1970).
Most people have forgotten the following crucial aspect of the old CA property tax: In 1977, the average property tax rate in California was 2.67 percent. Proposition 13 fixed that rate at 1 percent of the purchase price—plus a two percent annual increase, or the cost of living (COL) increase, if it’s less.
On top of the one percent base property tax rate, there are whatever additional taxes are approved to cover indebtedness, such as bonds—plus annual assessments for special districts. Although the additional taxes rate varies around the state, it generally runs a bit over two-tenths of 1 percent, setting the overall Proposition 13 effective property tax rate at 1.2 percent.
But let’s go back to that 2.67% property tax rate in the “good old days” of 1977 (the year before Prop. 13 passed) when the California government supposedly worked great—and apply it to today’s housing. The median home price in my city of San Diego in December 2018 was $550,000, essentially the same as the median value home of California ($548,000).
2.67% of 550,000 (less the paltry $7,000 CA “homeowner exemption”—a figure that has not changed since Prop 13 passed in 1978) translates into an annual property tax of $14,498, or $1,208 a month. And in 1977, if one’s CA home value shot up 10 percent in one year (as many Californians faced just prior to the passage of Prop 13), then one’s property taxes could also shoot up 10 percent.
Under the current Prop 13 rules (applying the typical 1.2% total tax rate), a family purchasing a median-priced house in San Diego today for $550,000 pays an initial property tax of $7,023, about $543 a month. Thus with Prop 13, the average new California homeowner is immediately saving at least $665 a month—every month—over what they would pay using the tax formula in place before Prop 13 passed.
Contrast this current $7,023 tax with the $14,498 annual property tax that the progressives so fervently wish that we still paid on the average home in San Diego. This is their “good old days”—using the same tax rules that applied prior to the passage of Prop 13.
One other consideration: Even though we save thousands on our property taxes each year (thanks to Prop 13), the median California homeowner still pays the 10th highest amount of property taxes in the nation. Indeed, the median California homeowner’s property tax bill is about 65 percent higher than the average homeowner property tax bill paid in the other 49 states.
By the way, anyone who believes our other California taxes would be lower if the old property taxes rules still applied is living in some parallel universe. No matter how high the CA taxes are, you could ask any state progressive “How much taxes should we pay?” and you’d always get the same bottom-line answer: more.