Frequently new homeowners will ask why they are paying twice as much (or far more) in property taxes than their neighbor. The answer is Proposition 13. Passed by the voters in June, 1978, Proposition 13 is an amendment to the California Constitution that limits the assessment and taxation of property in California. It restricts both the tax rate and the rate of increase allowed in assessing real property as follows:

• The property tax cannot exceed 1 % of a property's taxable value, plus bonds approved by the voters, service fees, improvement bonds, and special assessments.
• A property's original base value is its 1975-76 market value. A new base year value is established by reappraisal, whenever there is a change in ownership or new construction. Except for change in ownership or new construction, the increase in the assessed value of a property is limited to no more than 2% per year.
• Business Personal property, boats, airplanes and certain restricted properties are subject to annual reappraisal and assessment.
• In the case of real property, the adjusted (factored) base year value is the upper limit of value for property tax purposes.

Historically, the market value of real property has increased at a significantly greater rate than the assessed value, which is limited to no more than 2% per year, unless there is a change in ownership or new construction.

The result has been a widening disparity between the market value and assessed value of property in Santa Clara County. Long time property owners benefit from lower assessments while new, and frequently younger property owners, are adversely impacted by assessments that can be as much as ten times greater than the owner(s) of a similar property held for many years.

Between 1985 and 2001 the average assessed value in Santa Clara County of single family homes has ranged from 42% to 56% of the actual average market value.