The problem is that it creates a distortionary tax. Appreciation has given people multi-million dollar homes that they pay a pittance in tax on. So they hold that property as long as possible to enjoy the low tax rates - if they move their tax bill soars since that event triggers an assessment on their new home. This takes homes off the market and drives prices even higher.

The proposition was intended to prevent appreciation from pricing people out of their homes - in other words, to decrease the volume of transactions on the real estate market. This is government interference in the market - on top of the government interfering in the construction of new homes in the first place...

If they regularly re-assessed property values while lowering the applied rate, they could collect the same amount of money overall without distorting the market.

The problem is the kind of taxation, not the amount. Beyond the fact that property tax is less of a burden on economic activity than income tax, it's also the case that property tax is less likely to bankrupt the state because of reduced revenue during economic downturns.

The problem is that its tax scheme sucks