California Tax Distribution and Prop. 13

In California, property taxes aren’t always handled evenly. That’s because of a law called Proposition 13, that might be amended at the ballot box soon. The law was passed back in 1978, and has affected property assessments throughout Silicon Valley. In the report from the Santa Clara County Assessor’s Office, which was released in November 2019, it’s easy to see that a small portion of property owners are paying a large portion of the property taxes for the county. But how much will that change with the adjustments to Prop. 13?

No one really knows. There are both residential and commercial property tax implications to consider, and they affect what the county receives. But it looks as though the fair market value of property in the county would at least double based on the current assessments. That’s because many of the people who bought property before 1989 are “grandfathered in,” so they pay far less in property taxes than a current assessment on their property would allow. Because of that, 39 percent of the people in the county are paying 55 percent of the property tax. People who bought their homes before 1989 are paying just six percent.

New homeowners get most of the burden of county taxes, and the same is true for those who have multifamily properties. These people are paying 61 percent of the taxes on those properties in the county, if they purchased after 2008. With commercial property tax, the result is the same. While only 44 percent of commercial properties were purchased after 2008, they make up 61 percent of the county’s assessed value for those kinds of properties. Prop. 13 has a cap on the amount the property value can go up each year (two percent). But sold property is reassessed at the current market rate, which is much higher.

This issue is going back to the ballot box, because it’s clearly not working for everyone in the county. Most long-time property owners are paying very little, while people who just purchased their properties are paying far more. Adjusting for that disparity is something the voters can decide, and they will do that soon. The adjustments to Proposition 13 matter, but people who have been paying very little for their property taxes don’t want to suddenly be paying thousands more. That could affect voter turnout, and add to the delicate nature of the issue between long-term owners and those who feel they are paying too much because they purchased their properties much more recently.