NOTE: This is an updated, expanded article — using December, 2018 numbers.
A common misconception is that Prop 13 protects only the “old people” — that the new home buyers gain little benefit from Prop 13. It’s an educational (and scary) exercise to calculate what California homeowners’ property taxes would be if Prop 13 had NOT passed in 1978 — and no subsequent reforms in property taxes occurred (a fair assumption, given Democrat dominance of the state legislature since 1970).
Most people have forgotten the following crucial aspect of the old CA property taxes: In 1977, the average property tax rate in California was 2.67 percent. Proposition 13 fixed the rate at 1 percent of the purchase price [plus a 2% annual increase, or the COL, if it’s less].
On top of the 1% base property tax rate 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 at about two-tenths of 1 percent, setting the overall Proposition 13 rate at 1.2 percent.
Actually most people today will find that this article’s “1.2%” property tax rate somewhat understates what is actually paid. Looking at my own property tax bill, my annual “1%” tax on our 1993 home purchase is $4,904.15 in 2018-19. The other taxes for bonds, special districts, etc, bring my total property tax bill to $5,988.38. Hence my extra taxes compared to my 1% base property tax bill raise my property tax 22.1% — making the total rate 1.221%.
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 CA government supposedly worked great — and apply it to today’s housing. The median home price in the city of San Diego in December, 2018 was $550,000.
2.67% of 550,000 (less the paltry $7,000 “homeowner exemption”) translates into an annual property tax of $14,498 — $1,208 a month. And in 1977, if one’s CA home value shot up 20% in one year (as some Californians faced just prior to the passage of Prop 13), then one’s property taxes ALSO would shoot up 20%.
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 saving at LEAST $665 a month — every month — over what they would pay using the tax formula in place before Prop 13 passed.
$14,498 is the property tax that the progressives so fervently wish that we still paid on the average home in San Diego. THIS is the “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 93% higher than than the average homeowner property tax bill paid in the other 49 states.
BTW, 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 answer: