Prop 13 can provide a huge relief when your property values go up. Let's say you purchased a house in the late '70s for $50K. According to Prop 13, the highest taxable valuation allowable 42 years later would be $115,000, even though the actual value may be five times that. But for the new property owner who builds a comparable $575K house today, his tax bill is five times higher than the other home owner. In addition, his annual increase will also be five times higher than the first owner.
But lets say the new builder instead buys the first house for $575K (taxable value $115K), tears down the entire house except for one wall, and then uses that wall as part of the construction for a $5 million mansion, his property tax will still be based on $115K of value.
In other words, if you have a ton of money at your disposal, you can build a mansion, and get away with paying a paltry amount of property tax. And the fact that your property has such a low tax amount on it while your neighbor who didn't leave a wall up on his new mansion ends up paying taxes on $5 million value (43 times more).
The law is a boon for established Californians who owned their property at the time of passage and who have seen the real value of their property increase exponentially over the past four decades. But it has also shifted the burden over to newer property owners, either through higher tax valuations for newer construction or through higher purchase prices for lower taxed properties.
The biggest victim in all of this is a public education system that now ranks 50th in the country and a tax base that is not being taxed on actual property value, but on arbitrary government labelling of taxable amount with zero regard to actual value. So yes, people like San Fran Nan own multiple mansions in California, but face tax bills that are only a small fraction of actual value, while blighted areas can't find anyone willing to build on vacant lots because their property taxes will be based on actual value.
I am all for low taxes, but that should be for everyone across the board, not just those who managed to be grandfathered in.
See, I know people, now retired, who bought their (nice, brick) homes for 5-7K after WWII, who have been hit with "market based" reassessments repeatedly to the point their homes are now valued at 50-100X what they paid for them, and taxed based on a market value that, frankly has no meaning unless the house is actually on the market. That market, in a town where property values are fundamentally tied to global commodity prices, fluctuates as much as those prices, but somehow that "market value" assessment never goes down, when the actual value of the property if sold would go up or down with housing demand as those commodity prices go up and down.
My home was bought during a downturn for the low 30s, had been purchased prior to that for 90K, (many years ago) and is now "market valued" at about 280K (with the crash in oil prices
might bring half that), but the values here for tax purposes have only gone up. If I was one to move a lot, or play the boom/bust, I suppose I could have made more money buying and selling real estate than drilling holes in it.
We sought to eliminate the property tax on residential real estate a few years ago, and overnight some astroturf organizations popped up, backed mainly by teacher's organizations and lied flat out about how that would work. They had all the slick advertising., bought a bunch of air time, invoked "for the children" and didn't miss a lick in convincing enough people to not vote for the measure, even though it would have funded the public schools just fine. I just hope they are paying heavier taxes too. After the election, those organizations evaporated.
The fundamental weakness in the measure was the seeming 'gray area' around farms which have incorporated, something necessary to be able to pass along a couple million dollars worth of equipment and the land to farm with it, otherwise taxes would take a farm built over generations and make it economically nonviable overnight if the owner passed away in an accident., not to mention making other tax advantages available that an individual would not have. Although proponents of the measure tried to explain that agricultural real estate would be included, that was shouted down by the panic mongers of the NEA and others who wanted to maintain their hands in the pockets of every property owner in the state.