Proposition 13, passed by California voters on June 6, 1978, introduced significant reforms to the state's property tax system by amending the California Constitution. This initiative was a direct response to rapidly increasing property taxes, which burdened homeowners. Prop. 13 rolled back property assessments to 1975 market value levels and established a property tax rate of 1%, plus any additional rate necessary to cover voter-approved bonded debt.

Under Prop. 13, properties are only reassessed upon a change of ownership or completion of new construction. Once acquired, a property’s taxable "base value" is set at its market value on the purchase date, and future annual increases in this value are capped at 2%, regardless of how much the property’s actual market value changes. For example, if a property is purchased for $400,000, the base value for the first year would be $400,000. The following year, the base value could increase to a maximum of $408,000 and, in the third year, to $416,160, assuming the 2% cap is applied each year.

• Property Tax Rate Cap: Limits the property tax rate to 1% of the assessed value, plus any additional rate required to cover voter-approved bonded indebtedness.

• Assessment Rollback: Rolled back property assessments to their 1975 market value levels at the time of passage.

• Limited Reassessments: Properties are only reassessed at market value when sold, transferred, or undergoing new construction.

• Annual Assessment Increase Cap: Limits annual increases in the assessed value to a maximum of 2%, regardless of changes in the property’s market value.

• Acquisition Value-Based System: Transformed the property tax system from a cyclical market value-based system to one based on market value when acquired (purchase price typically determines the base value).

• Exemptions for Declining Values: Allows temporary reductions in assessed value when property values decline through Proposition 8 reviews.

• Business Personal Property: Business property, boats and airplanes remain subject to annual appraisal.

Voting Requirement for State Taxes
Under Proposition 13, any measure designed to increase state revenues must be approved by a two-thirds (66.67%) vote in each house of the Legislature.

Voter Approval for Local "Special" Taxes
Proposition 13 requires local governments to obtain approval from two-thirds of voters for any taxes levied for a designated or special purpose.

For school bonds, the voting requirement has been modified. While Prop. 13 originally required a two-thirds vote for local governments to pass taxes and bonds, Proposition 39, passed in 2000, lowered the threshold specifically for school bonds. Under Prop. 39, local school districts, community college districts, and county education offices can pass school bonds with a 55% voter approval, instead of the original two-thirds requirement, provided certain conditions are met.

These conditions include:

• A clear list of projects to be funded by the bond

• Annual audits to ensure the money is spent as intended

• A citizens’ oversight committee to monitor the spending

This reduced voting threshold applies specifically to bonds for school facility construction and improvements.