Billionaire Warren Buffett, Arnold Schwarzennegger’s new financial adviser in the California recall election, has shed some light on why California is facing a $38 billion budget shortfall. Buffett tells the Wall Street Journal today that it’s because the state’s Proposition 13, which limits property tax increases, has left California with ridiculously low tax rates, particularly for the very wealthy.
Buffett readily illustrates this point using two homes that he owns - one in Omaha, Nebraska and the other in Laguna Beach, California.
Buffett’s Nebraska home is valued at roughly $500,000 and his property taxes this year were $14,401.
Compare that to his Laguna Beach home which is valued at $4 million and had property taxes this year of just $2,264.
What’s more, the property taxes on Buffett’s Nebraska house went up $1,920 this year as that state, like every other one across the nation, sought to deal with the economic turmoil brought on by the latest Bush recession. But the property taxes on Buffett’s Laguna Beach mansion went up by just $23.
$23!!! The guy probably tips his bellhop more than that for carrying his luggage! No wonder California can’t balance its budget now that Bush and Co. have screwed up the nation’s economy.
Democrats in California have either been unable or unwilling to address this problem. They have either been blocked or cowed by Republican anti-tax zealots at every opportunity. Perhaps Buffett sees in Schwarzennegger an opportunity for a “Nixon in China” moment where it falls to a “Republican” to do the responsible thing. Because unless Californians want to turn their state into a giant version of Mississippi they are going to have to come up with some way to raise more revenues to get their budget back into balance.