Steve best answered your question. Enacted in 1978, Prop 13 is the primary factor. Complete details can be found here: http://en.wikipedia.org/wiki/California_Proposition_13_(1978) As Steve mentioned, every time CA gets into budget problems Prop 13 is placed on the table as a solution; however, modifying or repealing Prop 13 would have to be done via the initiative process.
Vicky also touched on what is likely the second leading cause for the disparity as Props 60/90 and 110 allows Prop 13 tax base transfers, as follows:
1) Prop 60 provides for the transfer of a base year value from a principal residence to a replacement dwelling within the same county by a homeowner age 55 and over.
2) Prop 90 authorizes county boards of supervisors to adopt ordinances allowing base year value transfers between different counties, which at the present moment only the following Counties are participating (confirm current status before taking any action): Alameda, Orange, San Mateo, Ventura, Los Angeles, San Diego, Santa Clara.
3) Prop 110's Section 74.3(b) extends Prop 60 & 90 to "... any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person, and that has been diagnosed as permanently affecting the person's ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs."
You can read more details here: http://docs.Steven-Anthony.com/Prop60-90-110.pdf Consult a CPA/Tax Advisor before taking any action.
Finally, as it appears as though you are in the midst of considering a purchase. As such, you may want to know how to accurately estimate your property tax for an individual property. The process for doing so is detailed here: http://www.trulia.com/blog/steve_ornellas_mba_re_mastersgri/
As examples a home purchased for $100,000 in 1977 would have had taxes of $1000 / yr (+bonds and assessments). If that property did not change hands or have any improvements done to it the owners would now be paying about $1900 / yr (again + bonds and ssessments) even though its value even today is probably worth $1,000,000. If that house sold this year for $1,000,000 the new owner would pay $10,000 (again + bonds and assessments).
An interesting side effect of Proposition 13 is that this has resulted in a shift in the property tax burden over the years from an equitable split between residential owners and business property owners (which change hands at a corporate Board of Directors level but not at the business entity level) to one where the vast majority of the property taxes are now paid by homeowners rather than businesses. As the challenge of balancing state and local government budgets increase look for this to be a hot topic of conversation.
The main reason is likely Propostion 13 which limits the annual amount a property's value assessed value can be increased. Over a period of time these differences can become large.
Hope that helps.
The property tax and listing price are independent indicators of the property's value. The listing price should reflect recent sales (3 months) within a 3 mile radius. This is how the appraiser, who really makes the decision for the value, will assess it's market value. The new property tax will be based off of the new sale price.
Hope this helps.