Ballot initiative which capped property tax at 1% and yearly increases at 2%
Proposition 13 (officially named the People's Initiative to Limit Property Taxation) is an amendment of the Constitution of California enacted during 1978, by means of the initiative process, to cap property taxes and limit property reassessments to when the property changes ownership, and to require a 2/3 majority for tax increases in the state legislature. The initiative was approved by California voters in a primary election on June 6, 1978, by a nearly two to one margin. It was upheld by the Supreme Court in 1992 in "Nordlinger v. Hahn", 505 U.S. 1 (1992). Proposition 13 is embodied in Article XIII A of the Constitution of the State of California.
The proposition decreased property taxes by assessing values at their 1976 value, limiting the rate of taxation to 1% of the assessed value, and restricting annual increases of assessed value to an inflation factor, not to exceed 2% per year. It prohibits reassessment of a new base year value except in cases of (a) change in ownership, or (b) completion of new construction. These rules apply equally to all real estate, residential and commercial—whether owned by individuals or corporations.
Significantly, the initiative also requires a two-thirds majority in both legislative houses for future increases of any state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds majority in local elections for local governments wishing to increase special taxes. (A "special tax" is a tax devoted specifically to a purpose: e.g. homelessness or road repair; money that does not go into a general fund.)
Proposition 13 has been described as California's most famous and influential ballot measure; it received enormous publicity throughout the United States. Passage of the initiative presaged a "taxpayer revolt" throughout the country that is sometimes thought to have contributed to the election of Ronald Reagan to the presidency during 1980. Of 30 anti-tax ballot measures that year, 13 passed. The proposition has been called the "third rail" (meaning "untouchable subject") of California politics, and it has generally been unpopular for lawmakers to attempt to change it.
As a consequence of Proposition 13, homeowners in California receive a property subsidy that increases the longer that they own their home. It has been described as a contributor to California's housing crisis, as its acquisition value system (where the assessed value of property is based on the date of its acquisition rather than current market value) incentivizes long-time homeowners to hold onto their properties rather than downsize, reducing the housing supply and raising housing prices.4
Purpose.
Limit the tax rate for properties.
 ;templatestyles src="Template:Blockquote/styles.css" / ;Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.
Proposition 13 declared property taxes were to be assessed their 1976 value and restricted annual increases of the tax to an inflation factor, not to exceed 2% per year. A reassessment of the property tax can be made only when a) the property ownership changes or b) there is construction done.
State responsibility.
The state has been given the responsibility of distributing the property tax revenues to local agencies.
Voting requirements state taxes.
In addition to decreasing property taxes and changing the role of the state, Proposition 13 also contained language requiring a two-thirds (2/3) majority in both legislative houses for future increases of any state tax rates or amounts of revenue collected, including income tax rates and sales tax rates.
Voting requirements local taxes.
Proposition 13 also requires two-thirds (2/3) voter approval for cities, counties, and special districts to impose special taxes. In "Altadena Library District v. Bloodgood", 192 Cal. App. 3d 585 (June 1987), the California Court of Appeal for the Second District determined that the two-thirds (2/3) voter approval requirement for special taxes under Proposition 13 applied to citizens initiatives.
Origins.
There are several theories of the origins of Proposition 13. The evidence for or against these accounts varies.
Displacement of retired homeowners.
One explanation is that older Californians with fixed incomes had increasing difficulty paying property taxes, which were rising as a result of California's population growth, continued growth in state and local government spending, increasing housing demand, government restrictions on new developments and inflation. Due to severe inflation during the 1970s, reassessments of residential property increased property taxes so much that some retired people could no longer afford to remain in homes they had purchased long before. A 2006 study published in "Law &amp; Society Review" supported this explanation, reporting that older voters, homeowners, and voters expecting a tax increase were more likely to vote for Proposition 13.
Proposition 13 is not the only law in California designed to prevent tax-induced displacement. The California Tax Postponement Program, passed in 1977, ensures that “homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria”.
School funding equalization.
Another explanation is Proposition 13 drew its impetus from the 1971 and 1976 California Supreme Court rulings in "Serrano v. Priest", which somewhat equalized California school funding by redistributing local property taxes from wealthy to poor school districts. According to this explanation, property owners in affluent districts perceived that the taxes they paid were no longer benefiting their local schools, and chose to cap their taxes.
A problem with this explanation is that the "Serrano" decision and school finance equalization were popular among California voters. While Californians who voted for Proposition 13 were less likely than other voters to support school finance equalization, Proposition 13 supporters were not more likely to oppose the "Serrano" decision, and on average they were typically supportive of both the "Serrano" decision and of school finance equalization.
Regressive tax distributions.
A 2020 study by Joshua Mound published in the "Journal of Policy History" challenged the idea that wealthy property owners' desire to cap their property taxes was the impetus for enacting Proposition 13, instead saying the "tax revolt" was rooted in lower and middle-income Americans' longstanding frustration with unfair and highly regressive tax distributions during the post-World War II decades.
The study said pro-growth Kennedy-Johnson "Growth Liberals" cut federal income taxes in the highest brackets in the 1960s while local officials raised regressive state and local taxes, creating a "pocketbook squeeze" that made voters less likely to approve local levies and bonds, which eventually led to the passage of Proposition 13. The study said the tax revolt was not limited to white voters nor associated with rising conservatism associated with the collapse of the "New Deal order" and the election of Ronald Reagan.
Expansion of state government.
Another explanation that has been offered is that spending by California's government had increased dramatically during the years prior to 1978, and voters sought to limit further growth. The evidence supporting this explanation is limited, as there have been no studies relating Californians' views on the size and role of government to their views on Proposition 13. It is true that California's government had grown. Between 1973 and 1977, California state and local government expenditures per $1,000 of personal income were 8.2% higher than the national norm. From 1949 to 1979, public sector employment in California outstripped employment growth in the private sector. By 1978, 14.7% of California's civilian work force were state and local government employees, almost double the proportion of the early 1950s.
Junior college expansion.
One example of the massive expansion of government in California in the decades before Proposition 13 was the rapid growth of public postsecondary education. In 1900, California had only a single public university at Berkeley, the University of California, and state normal schools which provided two-year teacher training programs at Chico, Los Angeles, San Diego, and San Francisco. In 1907, the American junior college movement was launched in California when the state legislature authorized high schools to offer lower-division college-level coursework, thereby enabling more high school graduates to attempt such courses without having to move away for college.
California was the proud leader of this movement, in that the United States went from zero junior colleges in 1900 to nineteen by 1915, of which eight were based in California. 
In 1960, the Master Plan for Higher Education provided that junior colleges would be established within commuting distance of nearly all California residents, which required the founding of twenty-two new colleges on top of the sixty-four colleges already operating as of 1960. In 1967, the junior colleges were renamed "community colleges" and became part of the California Community Colleges system. 
Before Proposition 13, community college districts were able "to levy certain taxes for special purposes without a vote of the public". Among these purposes were community services, fringe benefits, and child care. For example, before 1978, the North Orange County Community College District levied a special tax on all property owners in the district which funded a comprehensive health care plan generous enough to amount to an overall 4% increase in compensation for all employees. By severely curtailing the ability of community college districts to levy property taxes, Proposition 13 shifted the state's contribution to community colleges from 38% to 78% of their revenue.
Corruption.
During the early 1960s, there were several scandals in California involving county assessors. These assessors were found rewarding friends and allies with artificially low assessments, with tax bills to match. These scandals led to the passage of Assembly Bill 80 (AB 80) in 1966, which imposed standards to hold assessments to market value. The return to market value in the wake of AB 80 could easily represent a mid-double-digit percentage increase in assessment for many homeowners. As a result, a large number of California homeowners experienced an immediate and drastic rise in valuation, simultaneous with rising tax rates on that assessed value, only to be told that the taxed monies would be redistributed to distant communities. Cynicism about the favoritism of the tax system towards the wealthy and well-connected persisted into the 1970s. The ensuing anger started to form into a backlash against property taxes which coalesced around Howard Jarvis, a former newspaperman and appliance manufacturer, turned taxpayer activist in retirement.
Measure.
Howard Jarvis and Paul Gann were the most vocal and visible advocates of Proposition 13. Officially named the People's Initiative to Limit Property Taxation, and known popularly as the Jarvis-Gann Amendment, Proposition 13 was listed on the ballot through the California ballot initiative process, a provision of the California Constitution that allows a proposed law or constitutional amendment to be offered to voters if advocates collect a sufficient number of signatures on a petition. Proposition 13 passed with roughly two-thirds of those who voted in favor and with the participation of around two-thirds of registered voters. After passage, it became article XIII A of the California Constitution.
Under Proposition 13, the annual real estate tax on a parcel of property is limited to 1% of its assessed value. This "assessed value" may be increased only by a maximum of 2% per year until, and unless, the property has a change of ownership. At the time of the change in ownership the low assessed value may be reassessed to complete current market value that will produce a new base year value for the property, but future assessments are likewise restricted to the 2% annual maximum increase of the new base year value.
The property may be reassessed under certain conditions other than a change of ownership, such as when additions or new construction occur. The assessed value is also subject to reduction if the market value of the property declines below its assessed value, such as during a real estate slump. Reductions of property valuation were not provided for by Proposition 13 itself, but were made possible by the passage of Proposition 8 (Senate Constitutional Amendment No. 67) during 1978 that amended Proposition 13. Such a real estate slump and downward reassessments occurred during 2009 when the California State Board of Equalization announced an estimated reduction of property tax base year values due to negative inflation. The property tax in California is an ad valorem tax meaning that the tax assessed generally increases and decreases with the value of the property.
Effects.
Reduction in taxes.
In the year after Proposition 13 was passed, property tax revenue to local governments declined by roughly 60%