Crossposted in blue.
This week President Obama was in town to raise money for Senator Barbara Boxer's upcoming campaign for re-election. During his visit he was the guest of Gordon and Ann Getty at their mansion located in the heart of San Francisco's "Gold Coast" — a neighborhood which contains some of the most beautiful and expensive homes in the world.
Coincidentally or not, yesterday a new journalistic enterprise, The Bay Citizen, published a story on the Gettys' Gold Coast neighborhood, property taxes, and California's Proposition 13 (the anti-tax measure passed in 1978 which most progressives feel is a primary cause of California's horrible fiscal troubles).
It's an excellent, eye-opening piece of journalism.
First, a bit of background (for those who may not already know).
Proposition 13 amended California's Constitution thusly:
The proposition lowered property taxes by rolling back property values to their 1975 value and restricted annual increases in assessed value of real property to an inflation factor, not to exceed 2% per year. It also prohibited reassessment of a new base year value except upon (a) change in ownership or (b) completion of new construction.
In addition to lowering property taxes, the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. It also requires a two-thirds vote majority in local elections for local governments wishing to raise special taxes. Proposition 13 received an enormous amount of publicity, not only in California, but throughout the United States.
One of the good intentions behind Prop 13 was in response to senior citizens losing their homes in that era of rapid high inflation due to an inability to pay their (rapidly inflating) property taxes. But oh, what a terrible case of unintended consequences resulted. (I say "unintended" out of a perhaps-misplaced willingness to give the Howard Jarvis Taxpayers Association and its ilk the benefit of the doubt.)
The Bay Citizen piece (which includes pictures of some jaw-dropping real estate) begins by introducing a Palladian-style mansion worth something like $50 million dollars.
Usually, the financial burden of owning a large and valuable house includes a hefty property tax bill. Indeed, if Gladyne Mitchell had sold her house at 2901 Broadway, the new owners would have faced an annual tax of about $500,000.
But this is California, and thanks to the magic of Proposition 13, Gladyne Mitchell’s annual property taxes total just $7,722.
Mitchell’s tax bill is not the lowest on the Gold Coast. (Based on interviews with local real-estate professionals and data from the most recent sales on the street, The Bay Citizen is using a per-square-foot value of $2,500 for all of the homes discussed in this story.) That distinction belongs to Theo Schwabacher Jr., who pays $3,890 for 3050 Pacific Ave., worth about $12 million. Maryon D. Lewis, whose family gave San Francisco its Davies Symphony Hall, pays a tax bill of $4,965 at 2900 Broadway, worth about $21 million. The $19 million Kitt family home at 2801 Broadway pays $5,220. At 2950 Pacific Ave., the tax bill for the $22 million house is $5,435; Jane Newhall’s grandmother built the commanding grey-shingled house at 2950 Pacific Ave. in 1908 and her family has occupied it ever since. Each of these homeowners pays less than what the tax would be on a just-purchased $500,000 San Francisco starter home, because Prop. 13 froze property tax rates and limited increases in assessments to two percent per year as long as the home is not sold.
Taking a close look at the disparate tax contributions of this small but telling corner of the city illustrates the bottom-line impact of Prop. 13 in a way that no economic study can. It is one thing to know that a state with a $19 billion budget shortfall, whose governor earlier this month proposed eliminating CalWORKs, the social safety net for poor families with young children, is in dire fiscal condition. It is another to see how the legacy of Prop. 13 works at a house-by-house level, granting some of the state’s wealthiest citizens dramatically below-market property taxes. U.S. Supreme Court Justice John Paul Stevens, the lone dissenter on the court when it upheld Prop. 13 in 1992, called California’s pre-Prop. 13 landowning class "the Squires" whose tax advantages are "a privilege of a medieval character."
The entire article is outstanding, and contains the clearest summation of Prop 13 and its consequences (unintended or otherwise) that I've ever seen (along with a strong rebuttal to conservative anti-tax mania; if the teabaggers were really honest, they'd be all over this injustice).
I'm only a lowly renter, but I'm curious to know how it's fair that a large multi-million-dollar palazzo is assessed at less per annum (and/or per square foot) than a modest middle-class starter home.
"A privilege of a medieval character" indeed.