37 years ago, a significant event in politics took place with the approval of Proposition 13. This was the brainchild of tax advocate Howard Jarvis. Also known as the People’s Initiative to Limit Property Taxation, its two main objectives are to cut down property taxes while ensuring a two percent cap on assessment increases in the coming years and to give power to the majority in case legislators plan to increase these taxes.
The legislative act won but people were divided about it. While it was supposed to be beneficial to tax payers, it was not appealing to other groups. Here are some of the arguments raised by supporters and critics on this constitutional amendment in 1978:
List of Pros of Proposition 13
1. Owners of properties who bought 37 years ago and beyond pay lower taxes.
Advocates for Proposition 13 claim that people who invested in properties earlier than 1978 still enjoy low property taxes three decades after. Moreover, owners covered by Proposition 13 can transfer their tax assessments in the event that they sell the old property and buy a new one.
2. Low income earners during the passage of Proposition 13 were benefited.
With the passing of a law that caps property taxes, property owners who were hard up paying taxes for their homes because of insufficient income were given the chance to stay in their homes and give their properties to their children.
List of Cons of Proposition 13
1. It led to the cut of government revenues.
Critics argue that with the limit on imposed property taxes and the minimal annual increase allowed on ad valorem taxes on real properties affected by Proposition 13, the government lost huge amount if revenues. As a consequence, government funding for the communities like public libraries, schools and the like were affected and many were closed eventually.
2. It affected the educational system overall.
Another negative effect, according to opponents, is the direct effect of the Act on education in California. Years after voters’ approval, the state had dramatically reduced funding for schools. Many district schools have cut down the number of school days to lessen expenses. Some school districts cannot afford to pay teachers resulting to more number of students as opposed to the number of teachers.
3. Potential young homeowners are affected.
Although the tax cap on houses are advantageous to owners who get lower taxes, young people who want to own houses find it hard to do in the state of California. Instead, they are forced to rent and procrastinate in investing in property. Moreover, old home owners will most likely hold on to their homes and if they put their properties in the market, they can demand for higher prices, making it hard for potential buyers to acquire the properties.
4. It resulted to higher taxes in general.
Critics contend that in order to make up for lost revenues, taxpayers will still have to pay higher taxes on other forms of taxation like sales, health care and personal income taxes. And since there is an imbalance in property taxes, new property owners paying higher taxes on their properties, adding to the tax burden they have to face.