Hi Stevea, there's a second chapter to the story regarding this subject.

When you purchase an existing home you actually temporarily inherit the prior owners tax amount. This happens because it takes the County some time to recognize the change in ownership, which then triggers a Supplemental Tax bill.

In normal markets, where the new purchase price is greater than the Seller's basis, the supplemental tax bill informs you that you will be paying more due to the increase in purchase value. However, in this market, where purchase prices can be less than what the prior owner purchased at, you will also get a Supplemental bill advising that you have to pay taxes at the higher rate of the prior owner. This is because the County levies taxes based on property values as of January 1st of the year, which possibly in your case will show a higher value for the home than what you actually you bought the house for. If this is the case, your true new tax base won’t be corrected until Jan 2010.

One of the things that make this so confusing is the overlap of assessments and the fiscal tax year. The actual tax lien amount on a property is figured on the 1st of the year, but the actual fiscal tax year starts on July 1st. You can see this here:
http://docs.Steven-Anthony.com/PropTaxGuide&Impounds.pdf

I'm not sure what County you are in, but you will want to become familiar with CA's Prop 8, which allows you to petition for lowering your property taxes based on reduce market value. San Mateo has collected a number of very useful videos that explain the Prop 8 process here:
http://www.smcare.org/care/videos/default.asp

Best, Steve

Tax amount is the current purchase price times the current tax rate minus the owners current tax bill that gives your supplemental amount.