California Proposition 13 (1978) - The Measure

The Measure

Howard Jarvis and Paul Gann were the most vocal and visible advocates of Proposition 13. Officially named the "People's Initiative to Limit Property Taxation," and known popularly as the "Jarvis-Gann Amendment," Proposition 13 was listed 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 offered to voters if advocates collect a sufficient number of signatures on a petition. Proposition 13 passed with almost 65% of those who voted in favor and with the participation of nearly 70% of registered voters. After passage, it became article 13A of the California state constitution.

By Proposition 13, the annual real estate tax on a parcel of property is limited to 1% of its assessed value. This "assessed value," may be increased only by a maximum of 2% per year, until and unless the property has a change of ownership. At the time of the change in ownership the low assessed value may be reassessed to complete current market value which will produce a new base year value for the property, but future assessments are likewise restricted to the 2% annual maximum increase of the new base year value.

If the property's market value increases rapidly (values of many detached dwellings in California appreciated at annual rates averaging more than 10% in the decade ending with 2005) or if inflation exceeds 2%, 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 change of ownership, such as when additions or new construction occur. The assessed value is also subject to reduction if the market value of the property declines below its assessed value, for example, during a real estate slump. Reductions of property valuation were not provided for by Proposition 13 itself, but were made possible by the passage of Proposition 8 (SCA No. 67) during 1978 which amended Proposition 13. Such a real estate slump and downward reassessments occurred during 2009 when the State Board of Equalization announced an estimated reduction of property tax base year values due to negative inflation. Property tax in California is an Ad valorem tax meaning that the tax assessed (generally) increases and decreases with the value of the property.