California: Buffett lays down gauntlet on Prop. 13

San Francisco Chronicle ^ | August 17, 2003 | David Lazarus

[John Jorsett]

Warren Buffett's a smart guy.

"If Schwarzenegger follows that advice, it would be the political equivalent of slowly lowering himself into a vat of molten steel," said Paul Scott, a San Francisco attorney and president of Telegraph Hill Dwellers, a neighborhood association.

[John Jorsett]

As a voter and a homeowner, my feeling is that it's probably time Prop. 13 was taken out for a good dusting.

As a homeowner and taxpayer, my feeling is that it's probably time Mr. Lazarus was taken out and beaten in an alley.

[bert]

This is an interesting state of affairs. Did Buffet ever say taxes on real property need to be raised? Or, did he say they are too low.

I think his position is justifiable considering the wild inflation in real estate prices and population growth. (perhaps both trends are now reversed but true when he said it) Buffet said the taxes on his California properties was severely out of balance with his Nebraska properties.

The message is that the tax structure in California may have evolved in some wierd manner skewed by Propisition 13.

Given the financial situation, it may be true. For certain it needs scrutiny. This post is not an endorsement of higher taxes or of not chopping spending.

[07055]

There is absolutely nothing stopping Buffett or any other rich liberals who favor higher property taxes from writing a check to their local taxing authority for what they believe to be the appropriate amount.

[DoughtyOne]

Whatever else, Buffett makes a strong point. He told the Journal that his home in Omaha is valued at $500,000 and that he's paying more than $14,000 in annual property taxes.

But Buffett also owns a home in Laguna Beach (Orange County). It's valued at $4 million, yet he pays only $2,264 in annual property taxes.

Moreover, he noted that taxes on his Omaha residence rose almost $2,000 this year. Taxes on his California house climbed a mere $23.

The reason, of course, is Prop. 13, the 1978 measure that generally limits property-tax increases to 2 percent a year.
 

I don't know what property taxes are on recently rolled over property, but I'll bet it isn't all that far from the Omaha model.  I'm also willing to bet that Buffett has owned his Laguna Beach Property for decades.  That's why it's tax rate is so low.

The state of California spent $30 billion dollars more this year than in 1998.  It only went in debt $14 billion more.  That means that the state takes in $16 billion more today than it did in 1998.  Therefore, we have a overspending problem, not an under taxation problem.

California could have raised it's spending 20% since 1998 and maintained a balance surplus.  Instead it raised spending 40%.

Buffett is simply one more out of state brain-trust that hasn't a clue.

[dts32041]

Do pay attention to the man behind the curtain.

After arnold's name will have an r next to it standing for Rhino.

BTW the arguemnet against mary matalin being in the center of pubbie politics holds double for mr. Shriver.

[truth_seeker]

"The original idea was to prevent seniors and others on limited incomes from being tossed onto the street. The result, at least in part, has been a gaping hole in the state's budget reserves."

Therefore, if we were willing to throw "seniors and others on limited incomes from being tossed onto the street" we could close "a gaping hole in the state's budget reserves."

There are obvious logical conclusions which can be drawn:

1. Property taxes in Omaha, Nebraska are way too high. Voters there should change that. (It is doubtful they have income, sales, cigarette, alcohol tax rates equal to California).

2. Buffett's expertise is not in municipal Finance. If it was, he would have commented that California's spending is too high.

[Uncle Hal]

Lazarus is what passes for a business columnist in the business section of the ultra liberal SF Chronicle. He is very anti busuness and constently attacks corporations for virtually everything they do. He never has a good thing to say about the corporate world. Because of his anti capitalist ideas he should not be in the business section but in the editorial pages with the other biased columnists.

[liberallarry]

It will be interesting to hear the details of Buffet's proposal?

While I believe his motive for shooting his mouth off publicly was egomaniacal pride, the proposal itself must have some pretty sound reasoning behind it. Buffet's not an idiot in these matters.

[Wonder Warthog]

""I don't know if this was a trial balloon or just loose talk on Buffett's part," said Alan Auerbach, an economics professor at UC Berkeley."

Buffet (along with Bill Gates, Sr) has been advocating higher taxes for years, so this is neither a trial balloon nor loose talk. He is just continuing his same position.

Be damned to him AND "Micro-Borg's" daddy.

[pepperdog]

"There is absolutely nothing stopping Buffett or any other rich liberals who favor higher property taxes from writing a check to their local taxing authority for what they believe to be the appropriate amount."

Amen! But it isn't about what he could do-should do-would do, it's all about what he wants others to do! I would like to get a look at his income tax returns, bet he availed himself of every possible tax shelter too. Typical liberal, tell everyone else what to do but exempt himself.

[John Jorsett]

I don't know what property taxes are on recently rolled over property, but I'll bet it isn't all that far from the Omaha model. I'm also willing to bet that Buffett has owned his Laguna Beach Property for decades. That's why it's tax rate is so low.

Based on Buffet's numbers, he's paying about 3% on assessed value for his Omaha property, which is roughly what CA was charging prior to Prop 13. Today, it's 1% of assessed value and can't rise by more than 2% a year as long as you own it. Buffet bought the Laguna Beach property in 1971, which is why it's so low. If we went back to the system as it was in the bad old days, the average homeowner in CA would be paying 8 or 9 thousand a year. That's why there's no support for eliminating Prop 13, at least on residences.

[Still Thinking]

Ken Willis, president of the 14,500-member League of California Homeowners, said he can't imagine legislators ever receiving the go-ahead from voters for an increase in property taxes. "Once you give something away," he observed, "it's hard to take it back."

First of all, you fricking moroon, this was a VOTER INITIATIVE. I don't remember specifically, but I'm sure the legislature opposed this tooth and nail. Second, you can only "give away" what is rightfully yours, something that can never be said of tax revenues, which are paid with only by consent of the fleeced.

[John Jorsett]

This is an interesting state of affairs. Did Buffet ever say taxes on real property need to be raised? Or, did he say they are too low.

I think his position is justifiable considering the wild inflation in real estate prices and population growth. (perhaps both trends are now reversed but true when he said it) Buffet said the taxes on his California properties was severely out of balance with his Nebraska properties.

I'm always astounded at people whose first reaction to government putting the arm on them for more dough is, "Sure, how much do you want?" The first question should be, "What the hell did you do with all that money I've already given you?" Nebraska's top income tax rate is 6.84%. California's is 9%. Nebraska's sales tax is 5.5%. California's is 7.75%, with local boosts taking it up to 8.5% in some areas. Nebraska's corporate income tax rate ranges from 5.58 to 7.81. California's is a flat 8.84%. Californians are taxed to death already, and here Buffet is telling us our property taxes should go up because it isn't enough? Well, the hell with that. California is in trouble because its population and inflation have increased 21%, tax revenue has gone up 27%, and spending has gone up 38%. Buffet's position is definitely NOT justifiable.

[DoctorZIn]

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[DoughtyOne]

Thanks for supplying the information. I was wrong about the rates being the same for turned over property, but right about his holding that home for a long time.

Three percent is an outrageous figure. In ten years you'd pay the state almost one third of it's total value.

While property taxes sound low out here, Californians pay twice to three times as much for their property as folks in many other states do. I'd expect those paying 1% of these inflated prices, still net the state comparible revenues to many other states on each piece of property.

[vbmoneyspender]

the proposal itself must have some pretty sound reasoning behind it. Buffet's not an idiot in these matters.

I guess it has to be said over and over and over and over and over and over again. California's $38 billion budget deficit is NOT the result of taxes being too low.

The budget deficit is the result of liberal Democrats going on a five year long spending spree. If they had just kept state spending in line with inflation and population growth, we would have a budget surplus right now.

Our problems having nothing to do with Prop 13 or any other kind of tax limiting device. And the fact that Buffet does not acknowledge this shows either that he does not know what he is talking about or he anticipates obtaining some financial advantage from having taxes raised. In this regard, think along the lines of the advice the IMF has given out to countries like Mexico or Argentina or Thailand when they have threatened to default on the investments large financial institutions made in those countries. Just to refresh your recollection, the advice given has not been to drastically cut back state spending and state involvement in the economy, but instead to raise taxes. And just to refresh your recollection on whether that advice has worked, the response is it has not.

Indeed, lately the only countries that have been able to recover from such advice are countries like Russia,which responded to the IMF's demands to raise taxes by kicking the IMF out and lowering taxes through the use of a flat tax. The result is that, mirable dictu, Russia's economy is actually starting to grow again.

[Joe Hadenuf]

I agree. Messing with prop 13 is political suicide.....

[John Jorsett]

(It is doubtful they have income, sales, cigarette, alcohol tax rates equal to California).

See my post #14. Also, since you brought it up: gasoline taxes: Nebraska 25.4 cents per gallon. California 32. Alcohol: Nebraska $3.00 cents per gallon for spirits. California $3.30 per gallon.

[wardaddy]

Damn right...14K on a 500M home in property tax is very high. Here in Nashville which I'm guessing is larger than Omaha metro-wise, the tax on a 500M home would be around 4800-5700/year.