Opinion: Between Boardwalk and Park Place: luxury tax of $6,000

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When is a ballot measure a cartoon? When is it so outlandish that you can appreciate it for its entertainment value?

Way back in May, Councilman Richard Alarcon’s motion for a luxury tax - no, come back, I’m being serious - Alarcon’s motion to put a luxury tax on the March 3, 2009 city ballot was set for the budget committee. Well, the panel had a hearing Monday but couldn’t muster a quorum, so couldn’t vote, and it was pretty clear that even if it could, the members were a little, shall we say, skeptical of the plan to impose an annual $6,000 tax on Really Big Houses to reimburse the city for.... Well, not to reimburse the city for anything, but just because.

So the committee sent the motion to the full council, which has until Wednesday (item 63 on the agenda) to approve anything that’s going to voters in March. It’s a given that Alarcon’s proposal isn’t going anywhere, at least in its present form; not only couldn’t it get a vote in the budget committee, it couldn’t even get a hearing in the rules committee.

Alarcon is working on some fine-tuning to make the proposed law enforceable. As written, it would almost certainly violate the state Constitution’s restriction on ad valorem property taxes; that is, it would tax property in ways not permitted by Proposition 13, which limits annual increases in those taxes despite increases in value. The asserted distinction here (taxing size instead of value) is unlikely to fly in court since there’s an obvious connection between square footage and value.

In case you were wondering (and of course you were), L.A. has 6,336 single family homes of more than 5,000 square feet and 534 of more than 10,000. Who knew all those houses would fit on Boardwalk and Park Place?

At the committee hearing, city staff agreed to come back with some rather hefty changes, such as morphing the proposal into a new utility tax on water and electricity. That makes the whole thing a lot less fun and a lot more legal, but not necessarily more politically viable. Remember, voters in February already changed the utility tax to extend the portion on telephones to cell phones and other ‘new’ communication devices.

Alarcon said his plan was based on a tax in Aspen, Colo. But there’s a significant difference between the Aspen tax, geared toward conserving energy and power plant emissions and applicable to new construction, and this proposal, which Alarcon said was designed to raise cash (about $10 million, by his estimate) for the city. The motion’s language goes further, as it’s couched in the kind of language that conservatives cite for their ‘class warfare’ claims.

Here’s part:

OK, hang on a sec. Who is asking working families to pay higher utility fees? Wasn’t that you, City Council? Back to the motion:

Opportunity! If there is anything people want, it’s opportunity, and this is the city of opportunity. At least, a certain kind of opportunity. A side note: the motion cuts through the question of how to spell Angeleno/Angelino by trying it once each way. So there’s something here for everyone.

OK, you get the idea. How dare they be so rich and ostentatious. They must suck up a lot of electricity and water, and it’s only fair that they pay us back for it. Problem is, of course, they already do; we have tiered water and power rates so resource hogs pay for their excess. Could top rates be higher? Perhaps, and of course the reconfigured motion may now contemplate an additional utility tax.

But that’s not the current motion; it instead calls for a “Monopoly”-style luxury tax - a tax on people with the temerity to have big houses. If your square footage is more than 4,999, you have to pay the city $1,000. More than 5,999, you have to pay $2,000, and so on up to $6,000 if you have 10,000 or more square feet.

Alarcon acknowledged that ‘the message, to me, is just as important as the amount of money’ the tax would raise.

I’m speechless. No, I’m not. Fringe conservatives make one ridiculous claim after another about how liberals are just angry at the rich and crave revolution in order to grab others’ wealth. They take a comment like Barack Obama’s about how he wants to ‘spread the wealth around’ and nervously fantasize that he’s a Marxist come to abolish private property, rather than a moderate Democrat with a moderate plan to move the highest two income tax brackets back up to their 2001 levels.

Where do they dream up this stuff equating American liberalism with socialism? And then something like this motion comes along - or this proposed state ballot measure, currently in circulation for signatures - and I have to say, well, I understand where they dream it up.

Alarcon notes, correctly, that his plan would hit most rich folks with a much lighter touch than increases in income tax. But that doesn’t make it OK. There really are intelligent conversations to be had about revising Proposition 13 and making property taxes more closely reflect property value; and there really is room for reasoned discussion of public investment in projects or programs that bring broad returns to society. But those discussions are often shut down by alarmist claims that any deviation from the status quo or any consideration of any tax increase is a headlong rush toward confiscatory rates. For evidence, critics cite ideas like this one. Seems to me that a tax on, essentially, ostentation rather than transactions or income helps to undermine rational reform. So maybe this motion isn’t all that fun or entertaining after all.

AP Photo / Mark Sexton / Peabody Essex Museum