Voters in California have themselves to blame.

Flash back to 1978. Right-wing agitators are stirring up the population of California to amend the constitution of California and force tax assessments of property to almost stand still. (The annual real estate tax on a parcel of property is limited to 1% of its assessed value. This “assessed value,” however, may only be increased by a maximum of 2% per year, until and unless the property undergoes a change in ownership.)

Flash forward to today. Literally. 19 May 2009.

California voters are once again being asked to agree to cut services like child care and fire prevention (Fire prevention!! Ye gods, do these people read the news?) because the state budget will fall six billion dollars short of what’s needed.

It’s not that California voters didn’t have any justification. The white hot California real estate market really was forcing people out of their homes and California assessors, since they were elected rather than just being civil servants, were playing fast and loose with the rules to stay in office.

Like men spurring on a lynch mob, however, right-threaded wingnuts managed to channel California voter frustration into a free lunch for the moneyed class (again). One of my heros, Warren Buffett, made the numbers solid and understandable using his own property as an example.

In his own words …

I gave (a Wall Street Journal reporter) 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.

I then referenced my house in Omaha, which I believe to be worth about $500,000 (though it’s assessed at $690,000). Taxes on it were $14,401 in 2003 and $12,481 in 2002.

(Read Warren’s own statement at http://wealthandwant.com/docs/Buffett_Prop13.html.)

As in so many other things … this is now boomeranging back to reality. In this case, the Bush Depression has forced so many California owners out of their homes that a fairly massive valuation readjustment will now be taking place, albeit to lower levels. The right-threaded wingnuts did accomplish one thing. The California real estate market isn’t white hot anymore.