Proposition 13, officially titled the "People's Initiative to Limit Property Taxation," was a ballot initiative to amend the constitution of the state of California. The initiative was enacted by the voters of California on June 6, 1978. It would eventually be upheld as constitutional by the United States Supreme Court in the case of Nordlinger v. Hahn, 505 U.S. 1 (1992). Proposition 13 is embodied in Article 13A of the California Constitution. initiative, see Initiative (disambiguation). ... Official language(s) English Capital Sacramento Largest city Los Angeles Largest metro area Greater Los Angeles Area  Ranked 3rd  - Total 158,302 sq mi (410,000 km²)  - Width 250 miles (400 km)  - Length 770 miles (1,240 km)  - % water 4. ... is the 157th day of the year (158th in leap years) in the Gregorian calendar. ... Year 1978 (MCMLXXVIII) was a common year starting on Sunday (link displays the 1978 Gregorian calendar). ... Federal courts Supreme Court Circuit Courts of Appeal District Courts Elections Presidential elections Midterm elections Political Parties Democratic Republican Third parties State & Local government Governors Legislatures (List) State Courts Local Government Other countries  Atlas  Politics Portal      The Supreme Court of the United States (sometimes colloquially referred to by the acronym...

The most significant portion of the act is the first paragraph, which capped real estate taxes:

The proposition's passage resulted in a cap on property tax rates in the state, reducing them by an average of 57%. In addition to lowering property taxes, the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. Proposition 13 received an enormous amount of publicity, not only in California, but throughout the United States.^[1] Passage of the initiative presaged a "taxpayer revolt" throughout the country that is sometimes thought to have contributed to the election of Ronald Reagan to the presidency in 1980. However, of 30 anti-tax ballot measures that year, only 13 passed.^[2] Property tax, millage tax is an ad valorem tax that an owner of real estate or other property pays on the value of the property being taxed. ... A tax revolt is a political struggle to repeal, limit, or roll back a government-imposed tax. ... Ronald Wilson Reagan, GCB (February 6, 1911 – June 5, 2004) was the 40th President of the United States (1981–1989) and the 33rd Governor of California (1967–1975). ... Year 1980 (MCMLXXX) was a leap year starting on Tuesday (link displays the 1980 Gregorian calendar). ...

A large contributor to Proposition 13 was the sentiment that older Californians should not be priced out of their homes through high taxes.^[3] The proposition has been called the "third rail" (untouchable subject) of California politics and it is not politically popular for Sacramento lawmakers to attempt to change it.^[3] Third rail consisting of two strips of aluminium fitted to a steel rail. ... Sacramento is a Spanish- and Portuguese-language word meaning sacrament; it is a common toponym in parts of the world where those tongues were or are spoken. ...

Precedents

Proposition 13 drew its impetus from 1971 and 1976 California Supreme Court rulings in Serrano v. Priest, 5 Cal.3d 584 (1971) (Serrano I); Serrano v. Priest, 18 Cal.3d 728 (1976) (Serrano II); Serrano v. Priest, 20 Cal.3d 25 (1977) (Serrano III) that a property-tax based finance system for schools was unconstitutional. The California Constitution required the legislature to provide a free public school system for each district, and the Fourteenth Amendment of the United States Constitution (which includes the Equal Protection Clause) required all states provide to all citizens equal protection of the law. The court ruled that the amount of funding going to different districts was disproportionately favoring the wealthy. Previously, local property taxes went directly to the local school system, which minimized state government's involvement in the distribution of revenue. This system also allowed a wealthier district to fund its schools with a lower tax rate than the rate a less affluent district would have to set in order to yield the same funding per pupil. The Court ruled that the state had to make the distribution of revenue more equitable. The state legislature responded by capping the rate of local revenue that a school district could receive and distributing excess amounts among the poorer districts. Although this was more equitable, property owners in affluent districts perceived that the benefits of the taxes they paid were no longer enjoyed exclusively by the local schools. Year 1971 (MCMLXXI) was a common year starting on Friday (link will display full calendar) of the 1971 Gregorian calendar. ... Year 1976 Pick up sticks(MCMLXXVI) was a leap year starting on Thursday (link will display full calendar) of the Gregorian calendar. ... The Supreme Court of California is the state supreme court in California. ... Amendment XIV in the National Archives The Fourteenth Amendment to the United States Constitution (Amendment XIV) is one of the post-Civil War amendments (known as the Reconstruction Amendments), intended to secure rights for former slaves. ... The United States Constitution is the supreme law of the United States of America. ... Congressman John Bingham of Ohio was the principal framer of the Equal Protection Clause. ...

Moreover, the state's increasing population fueled increased demand for housing, resulting in higher property values and, consequently, higher taxes. Although the revenues supported the costs of growth, such as new schools, roads, and the extension of other municipal services, older Californians on fixed incomes were especially hard hit by rising property values. Due to inflation, reassessments on residential property drove property taxes so high that some retired people could no longer afford to remain in homes they had purchased long before.

In the early 1960s, several scandals erupted through California involving county assessors. These assessors, who had traditionally enjoyed great latitude in setting the taxable value of properties, were found rewarding friends and allies with artificially low assessments, with tax bills to match. These scandals led in 1966 to the passage of AB 80, which imposed standards to hold assessments to market value. However, assessors, who are elected officials, had traditionally used their flexibility to aid elderly homeowners on fixed incomes, and more broadly to systematically undervalue vote-rich residential properties and compensate by inflating commercial assessments. The return to market value in the wake of AB 80 could easily represent a mid-double-digit percentage increase in assessment for many homeowners. Look up Assessor in Wiktionary, the free dictionary. ...

As a result, a large number of California homeowners experienced an immediate and drastic rise in valuation, simultaneous with rising tax rates on that assessed value, only to be told that the taxed moneys would be redistributed to distant communities. The ensuing anger started to form into a backlash against property taxes which coalesced around Howard Jarvis. Howard Jarvis (September 22, 1903 - August 11, 1986) was born in Ogden, Utah and died in Los Angeles, California. ...

The preceding taxpayer revolt

Howard Jarvis and Paul Gann were the most vocal and visible backers of Proposition 13. Officially titled the "People's Initiative to Limit Property Taxation," and popularly known as the "Jarvis-Gann Amendment," Proposition 13 was placed on the ballot through the California ballot initiative process, a provision of the California constitution which allows a proposed law or constitutional amendment to be placed before the voters if backers collect a sufficient number of signatures on a petition. Proposition 13 passed with 65% of those who voted in favor and with the participation of 70% of registered voters. After passage, it became article 13A of the California state constitution. Howard Jarvis (September 22, 1903 - August 11, 1986) was born in Ogden, Utah and died in Los Angeles, California. ... Paul Gann, with Howard Jarvis, campaigned for Proposition 13, the property tax-cutting initiative in California in 1978. ... initiative, see Initiative (disambiguation). ... An amendment is a change to the constitution of a nation or a state. ... Look up Petition in Wiktionary, the free dictionary. ...

Under Proposition 13, the annual real estate tax on a parcel of residential property is limited to 1% of its assessed value. This "assessed value," however, may only be increased by a maximum of 2% per year, until and unless the property is resold. At the time of sale, the assessment may increase by an arbitrary amount, but future assessments are likewise restricted to the 2% annual maximum increase. If the property's market value increases rapidly (values of many detached dwellings in California have appreciated at annual rates averaging more than 10% over the course of several years) or if inflation exceeds 2% (common), the differential between the owner's taxes and the taxes a new owner would have to pay can become quite large.

The property may be reassessed under certain conditions other than a sale, such as when additions or new construction occur. The assessed value is also subject to reduction if the value of the house declines, for example, during a real estate slump.

Aftermath in California

Proposition 13 disproportionately affects coastal areas, such as Los Angeles and the Bay Area, where housing prices are higher, over inland communities, where housing prices are lower. Research remains to be done on whether the redistribution of tax base and overall cost in lost tax revenue outweighs the benefits of Proposition 13.^[4]

Cities and localities have become more dependent on funds from the state, which transferred to the state more power over local towns and cities than they otherwise would have had.^[3] The state provides money in "block grants" to cities to provide for services and totally bought out local county health and welfare centers.^[5] It is unknown whether this has created additional administrative overhead.^[5] Local governments have also become more dependent on sales taxes for funds, which some have said has resulted in poor land planning and encourages cities to encourage more retail stores and "big box"-type outlets and the jobs and ongoing sales tax those stores provide, rather than encouraging the growth of other sectors and types of jobs that may provide better opportunities for residents.^[3][5] In addition, cities have turned to an increase in fees to make up for the shortfall, with particularly high fees levied on developers creating new houses or industrial outlets.^[5] These fees are transferred to the building's buyer, who is often unaware of the thousands in fees paid because it is hidden within the building's cost.^[5] A sales tax is a consumption tax charged at the point of purchase for certain goods and services. ...

California public schools, which in the 1960s had been ranked #1 nationally in student achievement,^{[citation needed]} have fallen to 48th in many surveys of student achievement.^[6] Some have disputed Proposition 13's direct role in the move to state financing of public schools, because schools financed mostly by property taxes were declared unconstitutional in Serrano vs. Priest, and Proposition 13 was then passed partially as a result of that case.^[5] California's spending per pupil was the same as the national average until about 1985, when it began dropping, which led to another referendum, Proposition 98, that requires a certain percentage of the state's budget to be directed towards education.^[3] California Proposition 98 requires a minimum percentage of the state budget to be spent on K-14 education (K-12 schools and community colleges) in California. ...

Public libraries have seen a decrease in funding from cities.^[5] Fire departments were gutted because of a drastic loss of funds.^{[citation needed]} Police departments received generally the same amount of funding, from 15% in 1978 to 16% in 1995.^[5] Cities also cut water, gas and electricity expenses.^[5]

California's Proposition 13 has introduced major problems of equity and efficiency into the state's tax structure.^[7] An analytical approach to examining a tax policy is to apply the traditional principles of taxation, including equity, allocative efficiency, revenue yield/elasticity and administrative and political feasibility. Equity reflects the basic values of how our society determines different groups should be treated; these values include horizontal and vertical equity, ability to pay and benefits received. Allocative efficiency refers to the ways in which a tax policy influences changes in private consumption behavior. Revenue yield and elasticity refer to whether a revenue policy has the capacity to increase in the future in order to continue enabling government agencies to meet the demands of its residents. Lastly, administrative and political feasibility refer to whether a tax policy can be implemented and enforced with relatively little effort and is politically possible.

Proposition 13 freezes the value of properties at the time of purchase with a possible two percent annual assessment increase. Therefore, properties of equal value have a great amount of variation in their assessment, even if they are next to each other.^[3] Assuming that the price of a house is somewhat a determinant of a person’s wealth (and therefore ability to pay) and benefit received, this feature would lead neighbors or business owners who purchased a property at different periods of time to pay a different assessment, without any relationship to ability to pay or benefits received.^[3] Overall, these qualities create serious inequities and potentially introduce some amount of regressivity into the tax structure.^{[citation needed]}

Proposition 13 contributes to an inefficient housing market because it provides dis-incentives for selling property in favor of remaining at the current property and modifying or transferring to family members in order to avoid a new, higher assessed tax rate.^[8] California has more rigidity and friction in both its housing market and in renting due to the policy; one study comparing California's market to that of other states found that it increased tenure in owned homes by 10% and in renting by 19%.^[4] D.R. Mullins points out that “prospects of increased property tax liabilities triggered by residence or business location changes likely constrain mobility and filtering in the housing and property markets.”(pp. 118) If these policies favor remodeling or modifying over buying, the policy would have efficiency implications because it limits individuals' mobility from one community to another and other private economic activity.^{[citation needed]}

Because homeowners keep their homes for longer, young households often rent for longer before buying a house.^[4] Because Proposition 13 is a disincentive to sell, there is less turnover among owners near the older downtown areas, and prices have appreciated fastest in these areas. Young people who would be wealthy in other states are "house poor" in California, and are forced to live dozens of miles from their workplace in order to afford a home.^{[citation needed]} Thus, the Proposition can be seen as a transfer tax from the working classes to the retired class, as retirees are subsidized and the young have fewer working hours in their day because of long commutes.^{[citation needed]} Immigrants are another class of losers under Proposition 13,^{[citation needed]} since they come from other states where real estate is more affordable (due to property taxes being a larger fraction of the overall tax base) and their real estate equity buys less in the California housing market.^{[citation needed]} However, Proposition 13 is not the only factor working on California's housing market to create these conditions: as it grows, fewer places available to build new housing result in higher prices for existing housing. Because of geographical limits and enacted environmental and growth legislation from cities and counties, new development is increasingly expensive. California also has high rates of migrants from other countries and a high birth rate, which has contributed to higher demand for housing, and it has low amounts of moderately priced housing due to supply and demand.^[1]

This same policy has had a higher effect on migrants and African-Americans than whites, with both groups staying longer in their homes or renting for longer than whites.^[4]

Similarly, Proposition 13 greatly benefited homeowners whose homes have appreciated in value since it was passed, particularly those (such as the elderly) whose incomes have not risen as fast as property values. In cities with many older residents, this has led to a severe shortage of affordable housing, since new developments must often be far above the state's median home price in order to provide enough tax revenue to pay for the services they require. Impact fees have offset this problem somewhat, but are limited by developers' ability to go "jurisdiction shopping" for localities with low impact fees. An impact fee is a fee most commonly assessed on the construction of new buildings within a jurisdiction. ... Jurisdiction shopping is a form of economic behavior by which a private business interest seeks to locate its operations in a political unit with the least regulation and/or lowest costs, such as property taxes and impact fees. ...

One other complaint of young couples that are trying to buy a house is the fact that people that have retained their houses for several years have not only had the benefit of paying low property taxes but also are able to sell their property for a big premium. This a double "whammy" for these people. In order to afford a house, for young couples, both the husband and wife have to work. In essence, young couples and home buyers are subsidizing the existence of other people in the state. This is analogous to the same situation that was used as an excuse to push Prop 13 in that taxes from one district were being diverted to other districts. In this case, taxes from young and upcoming couples are being used to pay for other established people in the district.

Owners of commercial real estate have also benefited: if a corporation owning commercial property (such as a shopping mall) is sold or merged, but the property stays technically deeded to the corporation, ownership of the property can effectively change hands without triggering Proposition 13's provision that fixes the amount of tax based on the property's resale value.^[3] Since many properties owned by large companies are nominally owned by shell companies whose sole assets are the properties in question, this has led to situations that have struck many commentators, such as Steve Lopez and Michael Hiltzik of the Los Angeles Times, as absurd and unfair, with companies taking a lesser percentage of the overall tax burden than private homeowners.^[3] Smaller property owners do not have the "shell company" advantage that large property owners do.^[3] As an example, the Times has reported that the property tax bill of the historic Capitol Records building in Hollywood is approximately five cents per square foot, while a small house assessed at $300,000 may pay up to 60 times that on a per-square-foot basis. Critics of Proposition 13 have argued that this situation unfairly benefits commercial property owners and should be changed,^[3] but recent attempted ballot initiatives have not succeeded in altering assessment formulas. This just IN !!!:paris hiltons new dog. ... Capitol Records is a major United States-based record label, owned by EMI. // The Capitol Records company was founded by the songwriter Johnny Mercer in 1942, with the financial help of movie producer Buddy DeSylva and the business acumen of Glenn Wallichs, (1910-1971) (owner of Music City, at the... This article does not cite any references or sources. ...

Supporters of Proposition 13 argue that purchasers of homes, which are particularly expensive in California, should be able to predict their tax burden over the long term or else have to sell their property when taxes exceed their income. They also point out that property taxes as implemented in other states are dramatically higher as a percentage of house value and can be raised at the whim of local and state entities.

Imaginative strategies have been necessary for localities to compensate for Proposition 13 and the state's loss of most property tax revenue (which formerly went to cities and counties). Most California localities have recently sought their voters' approval for special assessments that would levy new taxes earmarked for services that used to be paid for entirely or partially from property taxes: road and sewer maintenance, school funding, street lighting, police and firefighting units, and penitentiary facilities. Sales tax rates have skyrocketed from 5% (the typical pre-Prop 13 level) to 8% and beyond.

California localities have taken measures such as using eminent domain and redevelopment laws to condemn blighted residential and industrial properties and convert them into sales tax generators such as shopping malls, multi-dealer "auto malls" such as the Cerritos Auto Square, and strip malls anchored by big-box stores such as Costco and Wal-Mart. Cities that have been notably successful with this strategy include Cerritos, Culver City, Emeryville, and Union City. However, the spread of big box retail is credited as another major factor behind California's severe housing shortage, as cities have routinely rezoned vacant parcels and "blighted" neighborhoods for retail in an attempt to increase their share of the sales tax pie. With developable land made scarce by open space preservation laws and by the resistance of single-family homeowners to up-zoning, the resulting market pressures have led to urban sprawl that has brought formerly rural areas like the Antelope and northern San Joaquin Valleys into the urban areas of Los Angeles and San Francisco, respectively. Eminent domain (U.S.), compulsory purchase (United Kingdom, New Zealand, Ireland), resumption/compulsory acquisition (Australia) or expropriation (Canada, South Africa) in common law legal systems is the inherent power of the state to seize a citizens private property, expropriate private property, or rights in private property, without the owner... 1999 photograph looking northeast on Chicagos now demolished Cabrini-Green housing project, one of many urban renewal efforts. ... Blight is a condition of property or the uses of property in parts of a city, town, or neighborhood that are detrimental to the physical, social, and/or economic well-being of a community. ... This article needs additional references or sources for verification. ... The Cerritos Auto Square is an automobile retail center located in the city of Cerritos, California. ... Example of a small strip mall. A strip mall (also called a plaza) is a shopping center where the stores are arranged in a row, with a sidewalk in front. ... This article does not cite its references or sources. ... Costco Wholesale Corporation (NASDAQ: COST) is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States,[1] with its flagship warehouse in nearby Seattle. ... Wal-Mart Stores, Inc. ... City nicknames: The Geographic Center of Southern California The Freeway City County: Los Angeles County, California Mayor: Paul W. Bowlen (re-elected 2003) Mayor Pro Tem: Laura Lee (elected 2003) City Council: Jim Edwards (elected 2005) Gloria A. Kappe (re-elected 2003) John F. Crawley (re-elected 2005) Mottos: A... Motto: The Heart of Screenland Location of Culver City in California Coordinates: Country United States of America State California County Los Angeles Incorporated (city) 1917-09-07 [2] Government  - City Manager Jerry Fulwood [1] Area  - City  5. ... The city of Emeryville highlighted within Alameda County Emeryville is a small city located in Alameda County, California, in the United States. ... The city of Union City highlighted within Alameda County For other places with this name, see Union City. ... A typical zoning map; this one identifies the zones, or development districts, in the city of Ontario, California Zoning is a North American term for a system of land-use regulation. ... Urban sprawl (also: suburban sprawl) is the spreading out of a city and its suburbs over rural land at the fringe of an urban area. ... A truck passes eastbound along the busy Highway 58 through the Antelope Valley. ... This article does not cite any references or sources. ...

Recent events

In the 2003 California recall election in which Arnold Schwarzenegger was elected governor, his advisor Warren Buffett suggested that Proposition 13 be repealed or changed as a method of balancing the state's budget. Schwarzenegger, believing that taking such a step would be to touch a political third rail that could end his gubernatorial career, said, "I told Warren that if he mentions Proposition 13 again he has to do 500 sit-ups." A 2004 Los Angeles Times Magazine cover story that detailed the proposition's damaging effects and advocated its repeal drew heavy criticism from its supporters. The 2003 California recall was a special election permitted under California law. ... Arnold Alois Schwarzenegger (German pronunciation (IPA): ) (born July 30, 1947) is an Austrian-American bodybuilder, actor, and politician, currently serving as the 38th Governor of the U.S. state of California. ... Warren Edward Buffett (b. ... Third rail consisting of two strips of aluminium fitted to a steel rail. ...

The geopolitical landscape in the United States

The initiative system, which gives voters the power to legislate, is not available in all states. In states that lack the initiative process, advocates of lower property taxes have been unable to advance measures like Proposition 13. In states that do allow citizen initiatives (24 in all) [1], measures similar to Proposition 13 have been passed.

The Howard Jarvis Taxpayers Association continues to lobby for lowered and limited taxes in California and has been the most ardent defender of Proposition 13. Howard Jarvis Taxpayers Association helped sponsor Proposition 13, the property tax-cutting initiative in California in 1978 which slashed property taxes by fifty-seven percent and initiated a national tax revolt. ...

References

• Smith, Daniel A. (1998) Tax Crusaders and the Politics of Direct Democracy, New York: Routledge. ISBN 0415919916

See also

• Proposition 2½, the Massachusetts version of Proposition 13, passed in 1980.
• Facilities Act of 1982 or simply Mello-Roos passed in 1982.

Proposition 2½[1] was a ballot initiative passed by Massachusetts voters in 1980. ... Official language(s) English Capital Boston Largest city Boston Area  Ranked 44th  - Total 10,555 sq mi (27,360 km²)  - Width 183 miles (295 km)  - Length 113 miles (182 km)  - % water 13. ... Year 1980 (MCMLXXX) was a leap year starting on Tuesday (link displays the 1980 Gregorian calendar). ... This article or section is not written in the formal tone expected of an encyclopedia article. ...

External links

• Full text of amendment
• Legal Constraints on Local Control