California's Proposition 13 and the Impact of Property taxes

There is a fascinating Wikipedia read on the Impact of Property Taxes. In part, it says:

Property tax has been held to be regressive (that is, to fall disproportionately on those of lower income) because of its impact on particular low-income/high-asset groups such as pensioners and farmers in drought years. Because these persons have high-assets accumulated over time, they have a high property tax liability. However, their current income level is low. Therefore, a larger proportion of their income goes to paying the property tax. In areas with high real estate appreciation (such as California in the 1970s and 2000s), there is often little or no relationship between property taxes and a homeowner's ability to pay them. The regressive nature of the tax was a common argument used by supporters of California Proposition 13. Others, however, have argued that property taxes are broadly progressive, since people of higher incomes are disproportionately likely to own property. These two points of view are not completely incompatible - it is possible for a tax to be progressive in general but to be regressive in relation to minority groups. As a result of these contradictions, some economists have called for the abolition of property taxes altogether, to be replaced by income taxes, consumption taxes such as Europe's VAT, or a combination of both.

Certainly, in West Haven, there is a large number of people who are pensioners who cannot afford to pay their newly inflated property taxes.

Proposition 13 (a.k.a. "People's Initiative to Limit Property Taxation") was a Ballot Initiative in California, passed in 1978, that had two main effects. The widely popular affect was that it reduced and caped taxes, reducing them by an average of 57%. However, the initiative also put in terminology that required two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. This effectively tied the hands of the Legislature with respect to providing services and infrastructure demanded by the public.

Under Proposition 13, property taxes are limited to 1% of the accessed value until the property is resold, and the can only incrase by a maximum of 2% per year. This means that if the value of the property increases dramatically (like our revaluations here in West Haven), or if inflation outruns the 2% rate, there can be quite a large difference between a current owner's taxes, and what a new owner would be taxed.

Proposition 13 has greatly helped seniors, who live on a fixed income, and assists in guaranteeing those who have lived long term in a house can continue to do so. However, it has hurt first time homeowners, as it has caused a shortage of affordable housing. Turnover in housing often creates dramatic increases in taxes, and this can lead to placing new home ownership out of the reach of young wage earners, particularly those with less income.

Unfortunately, lack of property tax income has meant that towns and cities have often had to create 'special accessments' for projects such as sewers, education, road maintenance, etc., which are services that were previously paid for by property taxes... basically, the money has to come from somewhere, and Proposition 13 hasn't cured that problem.