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Voters in California, fed up with massive increases in real estate taxes, passed Proposition 13. It capped real property taxes at 1% of a property's 'full cash value,' which was defined as the assessed valuation as of the 1975-1976 tax year or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment. One exemption authorizes the legislature to allow homeowners over the age of 55 who sell their principal residences to carry their previous base-year assessments with them to replacement residences of equal or lesser value. A second exemption applies to transfers of a principal residence (and up to $ 1 million of other real property) between parents and children. There was also a 2% cap on annual increases in assessed valuations. In California, real property was now assessed at values related to the value of the property at the time it was acquired by the taxpayer rather than to the value it has in the current real estate market. Less than two decades later, longer-term property owners were paying dramatically lower property taxes reflecting historic property values, while newer owners pay higher property taxes reflecting more recent values. By 1989, the 44% of California home owners who had owned their homes since the enactment of Proposition 13 in 1978 shouldered only 25% of the more than $4 billion in residential property taxes paid by homeowners statewide. In November 1988, P purchased a house for $170,000. The prior owners bought the home just two years before for $121,500. P's home was reassessed upward to $170,100. This resulted in a property tax increase of $453.60, up 36% to $1,701, for the 1988-1989 fiscal year. P discovered that she was paying about five times more in taxes than some of her neighbors who owned comparable homes since 1975 within the same residential development. P was extremely upset. P eventually brought suit against D seeking a tax refund and a declaration that her tax was unconstitutional. P claimed that Prop 13 created an arbitrary system which assigns disparate real property tax burdens on owners of generally comparable and similarly situated properties without regard to the use of the real property taxed, the burden the property places on government, the actual value of the property, or the financial capability of the property owner. The Superior Court sustained D's demurrer and dismissed the complaint without leave to amend. The California Court of Appeals affirmed. The court deemed any benefit to longtime California residents was deemed 'incidental' to an acquisition-value approach. The Court of Appeal found this acquisition cost assessment method survived equal protection review, because it was supported by at least two rational bases: first, it prevented property taxes from reflecting unduly inflated and unforeseen current values, and, second, it allowed property owners to estimate future liability with substantial certainty. It held that the right to travel was not infringed. The Supreme Court of California denied review. P appealed.

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