To follow up on Robert’s post this morning, I wanted to go back to a few words from the Wizard of Omaha, Warren Buffet, from back at the time of the recall election in 2003. At the time Buffet was an Arnold “advisor”, that is until he suggested that Prop 13 was a sad sack of a holy grail. If you recall, Buffet’s talk on taxes caused quite the brouhaha.
First, to address the more general comments he made at the time, they weren’t a general “raise taxes” argument so much as a fix the tax system argument. At the time, Buffet was famously quoted as saying he ends up paying a lower effective tax rate than his secretary after you count the sales tax and the other range of taxes we pay. This becomes even more troubling when you put this in the context of the tax commission’s latest ideas to flat tax the state. Basically, the Tax Commission wants to further kneecap the middle class by introducing a flat tax at 6% rather than introducing a more progressive bracket system along with a fair property tax. The problem with that, besides the initially obvious lack of a progressive system, is that the rich generally have more deductions, even under state law. So, like Warren Buffet said, the secretaries of the world end up paying more than the invesment moguls
Even taking volatility as a serious threat to the state budget, a flat tax is neither the only solution nor even an obvious solution. While taxing lower income earners would grade some of the peaks of the valleys of our general fund revenue, it would also impose a far larger portion of the burdern upon those that can least afford it. I get that such a scheme is a wet dream of all the loyal Bushies, but it is a solution that is far from acceptance in California.
In most states, other taxes, like property taxes, are used to smooth the curve from income taxes. And Buffet concentrated his fire on Prop 13. In a response to a Wall Street Journal article, he used his own properties to outline some of the problems with Prop 13:
What I said in respect to property taxes was very specific. I gave him an example of three houses, two in Laguna Beach and one in Omaha. The first Laguna Beach house is a property that I bought in the early 1970s. It has a current market value of about $4 million and, because of the limitations embodied in Proposition 13, carried taxes of only $2,264 in 2003 vs. $2,241 in 2002. The second house, located just in back of the first, is one that I purchased in the mid-1990s. It has a market value of about $2 million and, simply because I bought it later than the first, carried taxes of $12,002 in 2003 vs. $11,877 in 2002. I pointed out to Joe that these figures mean that the tax rate on the second house — same neighborhood, same owner, same ability to pay — is roughly 10 times the rate on the first house.
My sympathies are clearly with the “non-billionaire” family purchasing a $300,000 house in Chico today that faces real estate taxes materially higher than those borne by this non-resident billionaire on his $4 million house in Laguna. This family, because of Proposition 13, has been selected to subsidize me. (WSJ 11/3/03)
In modern-day California, even with declining property values, the middle class is held down on the ladder. Those who purchased their property decades ago get a subsidy from those who purchase today, even with the newly reduced property values. A family just starting out is subsidizing those who are already established.
And we have plenty of polling data on Prop 13, like this Field Poll (PDF) from last year. Yet this is what really boggles my mind, that even newer homeowners, who are subsidizing older homeowners and thus paying more than they should be, still support this crap. Let’s put succinctly, so that the 71% of voters who bought within the past 5 years and are “somewhat” or “not at all” familiar with Prop 13 see this: Prop 13 INFLATES your taxes.
Furthermore, there should be no question that the real losers from Prop 13 are renters. While renters would see some passthrough of taxes, they pay income taxes directly, dollar for dollar. In other words, they are hit disproportionately by the income tax. Yet, at least 41% of renters would vote in favor of Prop 13.
This is the result of third-rail politics, and the failure of liberals, progressives and generally reasonable people, from elected Democrats to grassroots activists to successfuly discuss, qualitatively and quantitatively, the havoc that Prop 13 has wrought on the state.
We have a lot of work to do with Prop 13, and efforts like Phil Ting’s are a nice step in the right direction. However, even the Wizard of Omaha understands that we simply cannot afford to ignore the “third rail” of California politics anymore. It hurts the middle and working class. It hurts renters, and it devestates state services. Ready or not, it’s time to play with 1000 volts.
Why is support for Proposition 13 such a surprise? Of course it’s a lopsided, inequitable benefit. But it’s also a club that new home owners are excited to join, for they, too, want to give a nice, big raspberry to the even newer home owners 15 years from now. It’s like any other entitlement, or sense of entitlement, at least.
Part of the problem here is that the Jarvis types have always had a wealth of quick slogans and anecdotes that are not true, or factual, but have enough “truthiness” to short circuit discussion or understanding of the issue.
The problem for us has elements of marketing, framing problems, and creating “support” for grassroots people. Prop 13 has always been too good to be true. Most of the benefit goes to big corporations who don’t look a lot like that poor grandma in Pasadena who is going to “lose her house”.
So we need to start priming people’s bullshit detectors, and we need to make clear who’s paying the price of the current policy. And we need to give a human face to those victims of the current policy. Like attractive young couples that look like the people the ads are targeted at that bought recently, comparing their property taxes to people who are grandfathered by Prop 13. And by showing how much we’d improve the tax base by fixing the the corporate loopholes in those self-same communities.
We need good marketing data on how attitudes about property taxes vary in the state by demographic and psychographic group, so that we can create better targeted campaigns.
And we need interactive tools like the wonderful California Budget Challenge set up by the Next Ten people, where you can play with rates and learn how that improves things for your community. And good stats as well that rebut common Jarvisite talking points.
This is a long term fight, and we’ll need to use better framing, better organization, and better marshaled facts to win it.