By CalTax President Rob Gutierrez
This column was published July 26 in the Los Angeles Daily News.
Property tax collections are at an all-time high in Los Angeles County, providing a windfall for schools and local government even as Proposition 13 protects property owners from unmanageable tax increases.
In other words, Proposition 13 is working. It makes the property tax a steadily growing source of revenue for local government, while providing certainty to Californians so they won’t be taxed out of their homes and businesses, and won’t face large rent increases triggered by tax hikes.
The value of taxable property in Los Angeles County grew more than 50 percent from 2009 to 2019 (a $541 billion increase), so revenue received by local governments this year will be more than 50 percent higher than just 10 years ago. This should put to rest any claim that Proposition 13 “starves” schools and local government.
“The strong growth in the local real estate market for the ninth consecutive year will have a positive impact on services for L.A. County’s 10 million residents,” County Assessor Jeff Prang said. “From education, healthcare, and mental health services, to public safety, transportation, and alleviating the homeless crisis, our schools, cities, and county programs will have approximately an additional $1 billion for vital local public services.”
Similar growth is happening throughout the state. Annual property tax revenue is now 49 percent higher in Orange County, 47 percent higher in San Diego County, and an amazing 85 percent higher in San Francisco when compared to 2009.
This growth – which occurs without the rollercoaster ups and downs associated with the income tax – may come as a surprise, as there is a common misperception that property tax rates are stuck in the 1970s. The truth is that inflation adjustments, changes in ownership and new construction all result in higher taxes.
Proposition 13 protects homeowners and business owners by limiting the tax rate to 1 percent (plus a small percentage to repay local voter-approved bonds, if any), and by capping the growth in taxable value at 2 percent a year. This makes the tax manageable for most home and business owners, while also increasing government revenue over time.
The inflation adjustment provides a large chunk of the annual aggregate countywide increases, but taxes also go up when properties are reassessed after ownership changes and new construction.
This year’s increase in Los Angeles County, for example, includes $1.95 billion in taxable value for the partially completed stadium for the Rams and Chargers (it will be assessed at an even higher amount when completed) and $200 million for the Banc of California Stadium.
In the Silicon Valley, the Santa Clara County assessor reported that “mega office and commercial property developments and major property acquisitions by iconic tech companies” were a major part of this year’s increase. In San Francisco, more than half of the yearly increase came from new construction.
Where would California be without Proposition 13? We still would be experiencing problems like those now hitting Chicago, where some property owners just found out their taxes are going up 11 percent, and tax rates are as high as 13 percent of market value. Would you be able to keep up with taxes based on escalating market values, with no way to control or predict next year’s tax?
Proposition 13 provides certainty and protection for all property owners, and also gives local governments a river of income. This win-win situation has never been more evident.
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