More than greed fuels art market
``In a situation where the art market is widely reported as going crazy, you have to expect people coming in from all over trying to sell art,'' says Gilbert Edelson, administrative vice-president of the Art Dealers Association, a trade group. Both art prices and the number of sellers are breaking past records. Although the usual reasons for spiraling art prices still apply - to make as much money as possible - new reasons, including the falling dollar and new tax laws, are also playing a bigger role.
High auction prices have brought in many sellers who might otherwise have donated their works to museums or sold privately through dealers. ``People are obviously attracted to the possibility of making a lot of money because of the high prices they hear works going for,'' says Marcus Halliwell, director of the paintings department at Phillips Auction Galleries in New York. ``It's old-fashioned greed.''
The auction market has been buoyed by the decline in the value of the dollar in relation to other world currencies, he and others noted, making work sold by Americans more affordable to collectors around the world, especially in Japan, where the yen is worth more than twice what it was in dollars just two years ago.
Among the other reasons many people have gone the auction route is that the ``alternative minimum tax,'' which was part of the 1986 Tax Reform Act, has provided for many wealthy potential donors a significant disincentive for giving works to museums.
The alternative minimum tax, which equals 21 percent of income, was established to ensure that no one with a substantial income could claim so many deductions as to pay no taxes at all. The tax applies to various areas classified as tax-preference items and includes charitable gifts of objects. The benefit of a donation is now based only on the piece's value when it was purchased and not on its appreciated value.
Jasper Johns's ``False Start,'' which was sold last month for $17.5 million, is an example of how this can work. The selling price was the most paid for any work by a living American artist. Only the day before, on Nov. 9, his ``White Flag'' sold at Christie's for $7 million.
The tax deduction for ``False Start,'' which was purchased in 1960 for $3,150, would have been only $3,811, had it been donated to a museum. With the lowering of capital gains and income taxes in the 1986 Tax Reform Act, the owners did far better with a sale.
Other works that went for very high prices last month included Pablo Picasso's ``Acrobat and Young Harlequin'' ($38.45 million), Robert Rauschenberg's ``Rebus'' ($6.3 million), Andy Warhol's ``Marilyn Monroe (Twenty Times)'' ($3.96 million), Pierre Bonnard's ``After the Meal'' ($7.48 million), and Henri Fantin-Latour's ``Hydrangeas, Wallflowers, and Two Pots of Pansies'' ($3.08 million). In November 1987, Vincent van Gogh's ``Irises'' went for $53 million.
So with donors less willing to give works and museums seeing very high prices for objects they would like to own, the museums have become active sellers in the auction market themselves.
``We've certainly seen more museums bringing works to auction over the past few years,'' said Scott Schaeffer, director of Sotheby's Museum Services Department, which specializes in helping these institutions remove artworks from their permanent collections before selling them, a process known as deaccessioning.
``Storing works that aren't shown is a major, costly burden for them,'' he says. ``If they're not showing them, why not sell them? Deaccessioning works is also a way to raise money to buy ones they need. The Museum of Modern Art in New York City has stated publicly that the only way they could buy a work was to sell a work.''
Among the museums that have sold at Sotheby's are the Corcoran Gallery in Washington, which had shifted its focus away from its 19th-century art to works of the 20th century, the Los Angeles County Museum of Art, and the Museum of Modern Art, both of which looked to sell lesser pieces to raise cash for works they wanted more.
The Museum of Modern Art, for instance, had decided to sell two Henri Matisse paintings so as to buy a sculpture by the same artist. The museum was pleasantly surprised in the recent sales when both paintings sold for far more than the cost of the sculpture - $3 million and $5 million, respectively.
High art prices have also encouraged others to enter the art sale business, hoping to capitalize. ``Even American Express is sending over-hyperboled art offerings along with your bill,'' said Mark Rosen, head of the print department at Sotheby's.
A variety of companies have been started in the past two years, making over-the-telephone and mail-order sales pitches for art. Churchill Fine Art Inc., in Beverly Hills, Calif., sent out a brochure announcing that ``20th-century masters such as Renoir, Picasso, Dali, and Chagall, etc., rose in value 19 times,'' and a mailer from First Fidelity Exchange Corporation of Marina del Rey, Calif., contains a chart showing how Leroy Neimann prints increased in value almost 2,000 percent between 1975 and 1987.
``In times like this when the stock market has been so jittery, people are looking all over for a conservative place to put their money, and I think art is that safe haven,'' claims Eugene Hunter, an account executive at First Fidelity.