Prop. 13 Benefits a Few at the Expense of Many

The assessed valuation of Orange County property, fueled by a hot real estate market, has increased 10.5% over last year. The boost in values, the highest in four years and about 2% more than county officials predicted, was even more dramatic in individual communities such as Laguna Beach, where the annexation of south Laguna helped raise the city’s property assessment values 40%, and Yorba Linda, where values increased 25%.

The large increase in the assessment roll was unexpected good news for local government because it means more local tax dollars to ease tight budgets. It was good news for some homeowners because it means their property is worth more.

But it also exacerbates the inequity that finds some homeowners paying four to five times more in property taxes each year than their next-door neighbors--even though both homes are worth about the same on the market.

That is because under Proposition 13, new homes, newly purchased homes or homes that are renovated are taxed according to the current market value. Exempt from heavy increases caused by increasing property values are those who have remained in their present homes since 1978, when Proposition 13 passed and froze property valuations at the 1975 level. Increases in valuation were restricted to a maximum of 2% a year, as long as property was not sold or significantly altered.

The result is a built-in inequity that benefits homeowners that assessors call “stay-putters” while their neighbors who bought after 1975 pay higher taxes for homes of equal value.

In Orange County the disparity hurts most homeowners. Of 671,000 parcels of land in the county, 183,000 are being taxed according to 1975 valuations. The rest are paying a greater proportion of taxes. That’s a ridiculously unjust ramification of Proposition 13, which has turned out to actually benefit only a relatively few residents at the expense of their neighbors and of better schools and local government services.

The few efforts to change the ratio and apply Proposition 13 more equitably have not been successful because, so far, all attempts would further reduce the property tax revenue already severely limited by Proposition 13.

What is needed is a plan that would raise taxes from some other source to replace those lost by correcting the growing inequity that Proposition 13 is causing. That would not be a tax increase but a needed shift to finally end the objectionable and unfair burden being carried by a majority of homeowners.