The Property Tax after Proposition 13

1
The Property Tax after Proposition 13

• Public Budgeting and Finance
• March 13, 2001

2
The Property Tax in California

• Property Tax Basics
• Dysfunctional System Issues for Reform

3
Property Tax Basics

• Proposition 13 (1978) Limits Rate to 1 Percent,
  Plus Voter-Approved Debt
• Acquisition-based Assessment With Inflation
  Factor
• Allocation to Local Jurisdictions, But Never
  Outside of County
• State Controls Allocation Formulas (AB 8, 1979)

4
Property Tax Represents Nearly A Third of City
and County Tax Revenues
Property Taxes
Other Taxes
Vehicle License
Fee
Optional Sales
Taxes
Bradley Burns
Sales Taxes
5
Property Taxes Are Distributed to Many Entities
Within a County
22.7 Billion
1999-00
Distribution of Revenues
To Local Governments
Other Local
Schools
Entities
Property Owner
Cities
Counties
County Tax Collection
6
Issues for Local Government Reform

• Lack of Taxpayer Knowledge
• Lack of Local Control
• Outdated Allocation of Property Tax Revenues
• Influence of Sales Tax on Land Use Decisions
• Residential vs. Business Share of Property Tax

7
Lack of Information on a Property Tax Bill
8
State Controls Allocation Among Entities
9
Property Tax Allocation Like Anything Left in
the Freezer Too Long

• Frozen Tax Preferences of the 1970s
• Local Residents Have No Control Over Allocation
  of Local Tax

10
Allocation of Property Taxes Varies
11
The Power of the Sales Tax

• Small Share of Property Tax
• 1 Percent Bradley Burns Sales Tax Rate
• Competition for Large Retailers

12
Primary Residences Share of Total Assessed Value
On the Rise
13
Why No Reform?

• Countless Commissions, Task Forces, and Reports
• General Consensus on the Problems
• Attempts at Revenue Neutral Reform
• Inherent Policy Tradeoffs