property comprises of land, fixtures, buildings, mineral rights and other similar components. Personal property is commonly limited to businesses and also includes equipment, machinery and aircraft.

Properties owned by government or charities, automobiles, securities, household personal property and business inventories are exempted from property tax.

Property taxes are assessed on the value of the real and personal property in the state. County assessors assess most of the properties locally, while some properties are assessed by the state, such as the utilities and railroads. Before Proposition 13 became a part of Article 13A of the California Constitution, all the properties were assessed based on the market value and a locally fixed tax rate was applied to the assessed value to calculate the total tax levied.

Due to the induction of Proposition 13 in Article13A, there are many restrictions on property tax, thus limiting the local government to raise the revenues obtained from this tax.

The local tax assessment of real properties is based on the acquisition value, while other properties still continue to be assessed based on their market value.

. The total assessed value is increased annually, according to the rate of inflation or by 2 percent.
. On resale of the real property, the reassessment is done at market value, based on the purchase price.

Property Tax Rate -The countrywide property tax rate is restricted to 1 percent of the total assessed value. Voter approved general obligation debt permits additional levies. For 1998-99 the average tax rate was 1,069 percent and the highest 1,167 percent was from the city and county of San Francisco.

Allocation of Property Tax - The share contributed by the property taxes towards a percent of the total revenue varies widely in different government entities. Under Proposition 13 in Article13A, the state gained the responsibility of allocating the property taxes among the local governments. To reduce state costs, the state government shifted its property allocation from counties, cities and special districts to schools in 1992 and 1993. This shifting was done through a mechanism known as Educational Revenue Augmentation Fund or ERAF.

Issues of Property Tax:

. Fairness of Tax- Under recent assessment methods the property owners could pay vastly different taxes based on the date of purchase of their property.

. Personal Property Assessment- There are many issues raised on using appropriate methods to assess the value of the personal property, as it largely affects businesses.

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