The Effect Of Proposition 13 On The Rate Of California Foreclosures In The Next Few Years

Study on the effect of Proposition 13 on the rate of California foreclosures in the Golden State is a worthy activity to take on, considering how much affect California has on the rest of the country, especially when it comes to initiatives like Prop 13. This initiative passed by the people of California in 1978 has had a far-ranging impact on the state and the rest of the country, it seems.

Officially, Prop 13 is called “The People’s Initiative to Limit Property Taxation.” It’s an amendment to the Constitution of California that caps taxes on property and real estate at a predetermined level. These property tax rates were held to 1% of value, which in some cases led to a reduction in tax rates of up to 60%.

Basically, Proposition 13 was a reaction on the part of many state voters over what at the time was believed to be unfair usage of taxes to continually raise their rates on property as a way of strengthening state revenue collections. A person who bought a home in California prior to 1978 could be staring at a big tax bill at sale and then yearly continually increasing tax bills from then on out.

There are always actions and reactions to anything, and an action that may have been unanticipated was that legislatures in the Golden State were effectively prevented from raising any sort of revenue on home sales other than what was laid out in the initiative. The dispute over that went all the way to the Supreme Court, which held in 1992 that it was legal. Prop 13 usually affects the state and its municipalities after foreclosure, for the most part.

This is because most municipalities and the state itself depend on revenues coming from tax rates. When tax rates cannot keep up with the amount of spending, trouble can ensue. While the housing market was going gangbusters out in California, there was little trouble because volume was making up for what would have been a shortfall. Unfortunately, nobody banked any of those revenues for a rainy day.

Most economic experts think that the rainy day in California — in terms of home sales — finally arrived at some point in 2006, and the rate of CA foreclosures seems to be evidence of that fact. There are small signs of rate stabilization but home prices have been in decline for a while. With homes worth less, the state is taking in less revenue from sales taxes on those homes.

Conservative estimates by supporters of the proposition maintain that it has saved taxpayers over $528 billion from its inception until mid-2009. Those who argue for repeal continue to state that Proposition 13 has had a direct effect to the budget problems have only been exacerbated by the bust in real estate which California is currently experiencing.

It appears, for the time being, that the rate of CA foreclosures may have stabilized for the near future. At any rate, any talk of repeal of Proposition 13 is probably sterile, as people living in the Golden State currently don’t seem to have much taste for trying to deal with that issue. It’s probably better for California to get its bearings back through budget discipline and spending cuts, first of all.

The effect of Proposition 13 on the rate of CA foreclosures is a worthy activity to look into, considering how much affect California has on the rest of the USA, especially when it comes to initiatives like Prop 13. We’ve got the ultimate inside scoop now on ca foreclosure properties.