The Millionaires Tax and Jerry Brown’s Terrorizing Tactic

jerry brownCurrent political developments in California highlight the gaping chasm that divides the established political process – which is routinely mislabeled as “democratic” – with the positions embraced by the vast majority of Californians.

Unfortunately, California is to the United States as Greece is to Europe: both are fiscal basket cases. California has been suffering major budget deficits long before the Great Recession smashed the real estate bubble and drove it further into debt. But the underlying causes of its chronic fiscal problems are seldom mentioned in the corporate media.

The Great Recession is surely a contributing factor. But more importantly there has been a steady shift of tax revenue away from corporations and the rich – the “people” who can most afford to pay – and onto the backs of working people.

In the late 1970s, for example, Proposition 13 was passed which limited property taxes for homeowners and corporations. However, because of various loopholes, the proposition has been far more beneficial to corporations than to homeowners, resulting in a major loss of revenue for the state and a downward slide in corporate taxes.

Then in the 1980s the state inheritance tax was abolished, which constituted a huge boon to the rich. The New York Times reported: “Consider this: If each Californian could bequeath no more than $2 million, a 100 percent tax on the surplus estate assets would wipe out the state’s entire budget deficit.”

Even back in 2003 The New York Times was reporting on declining taxes for corporations across the country and particularly in California:

“Tax sheltering has cost states more than a third of their revenue from taxes on corporate profits, a new study showed yesterday, adding to the severe strain on state finances across the country.” And the article added: “In the 1980’s 9 percent of corporate profits were paid to states. This number had declined to less than 6 percent by 2001…”.

All these developments have coalesced to produce a perverse tax structure in California: the poor pay at the highest tax rates while the rich pay at the lowest rates. The bottom fifth pay at a 11.1 percent tax rate while the top 1 percent pay only 7 percent.

And these tax trends have in turn contributed to growing inequalities in wealth: during the past three decades the incomes of the wealthiest 1 percent of Californians grew by 81 percent while the income of the bottom 20 percent dropped by 11.5 percent.

But on those rare occasions when politicians propose raising taxes to reduce the deficit, they fail to mention these staggering trends. Instead they engage in incessant clamoring about “shared sacrifice” and a “balanced” approach. With this as his mantra, Democratic Governor Jerry Brown initially proposed a temporary tax measure that would have raised taxes on everyone. It included a regressive one-half cent sales tax increase that would have burdened the poor far more than the rich and a mere 1 percent increase in the taxes on those making over $250,000 and a 2 percent increase on those making over $500,000.

But what Brown was not expecting was a fight-back mounted by one of the teacher unions. California Federation of Teachers (CFT) proposed its own ballot initiative – the Millionaires Tax – that would have only raised taxes on the rich by raising their rates 3 percent on those making over $1 million and 5 percent on those making over $2 million. Their initiative polled much better than Brown’s.

Under intense pressure, CFT’s leaders eventually capitulated and agreed to drop their initiative and instead opted for a dubious compromise version brokered with Brown. The compromise would reduce the sales tax to one-fourth cent and raise tax rates 1 percent on those making over $250,000, 2 percent on those making over $300,000 and 3 percent on those making over $500,000.

It is not clear this compromise measure will pass because of its ambivalent nature. It currently has the support of 56 percent of likely voters, 58 percent oppose “a key part of it – the quarter-cent sales tax increas,” according to a San Francisco Chronicle article. When CFT’s Millionaires Tax was a contender and was polled, it had 62 percent support.

Thanks to the Occupy Movement, people are becoming increasingly aware of the growing inequalities in wealth and the underlying declining tax burden on the rich. Hence, they have offered strong support to initiatives that target only the rich and have rejected regressive taxes such as sales taxes.

And this tenuous support has led Jerry Brown to resort to his terror tactic, intended to strike fear in the hearts of the public. He has told the people of California that if they do not support this new compromise tax proposal, then automatic trigger cuts will go into effect that will brutally slash the budget of public education on all levels. According to the same Chronicle article, this threat has evoked hatred: “They [likely California voters] also hate the automatic spending cuts to public education if voters reject the Brown’s tax plan. And we mean hate – 72 percent oppose these trigger cuts.”

If democracy ruled, the sales taxes would be reduced, taxes on the rich would go way up, and our schools and social services would be fully funded. But thanks to the influence of the 1 percent and the politicians they subsidize, the people of California are being terrorized into voting for a measure they actually in part reject.

Ann Robertson and Bill Leumer

Ann Robertson is a Lecturer at San Francisco State University and a member of the California Faculty Association. Bill Leumer is a member of the International Brotherhood of Teamsters, Local 853 (ret.). Both are writers for Workers Action and may be reached at sanfrancisco@workerscompass.org.

Posted: Monday, 28 May 2012

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Comments

  1. JoeWeinstein says

    Let’s acknowledge a bit of nuance.  First, California is NOT yet a Greece-like basket case.  In fact for years we have been sending more to the Feds than the Feds send back.   But we have become truly adept at fiscally shooting ourselves in the foot. 
    We are a powerhouse of tech innovation and hi-tech enterprise – but instead of watchfully nurturing the higher ed system which has made this possible we fail to adequately tax the resulting hi-roller businesses. 
    Second, we send more to the Feds than the Feds send back. 
    Third, we fail to join other states in suitably taxing big extractors of oil and gas. 
    Fourth, Prop 13 remains a needless windfall for commercial property owners which could be repealed, while keeping intact the part of it that was (and will again be) needed: protection for small-time homeowners whose income in many years does not keep pace with oft-dizzying inflation in California (and indeed often only California) real estate values. 
    Fifth, above all we multiply shoot ourselves fiscally in the foot (or let the Feds do it without a squeak of protest and push-back on our part) with our disastrous approach to marijuana and other substances on an arbitrarily made-up list of ‘drugs’. 
                We deliberate refuse to legalize and tax a valued crop; deliberately ensure lucrative economic bases, via drug distribution, for criminal gangs and cartels; deliberately provoke urban violence via gang distribution-turf wars; deliberately divert existing police and create more just to enforce criminalization of substance possession; deliberately incarcerate the criminalized people to ensure that they won’t be productively employed taxpayers; deliberately spend huge sums for prisons and guards; and deliberately push growers into defensively and  paranoidly growing their crops anonymously – and with utter ecological irresponsibility and ruination – on sensitive public land and in the bargain diverting the efforts and risking the lives of wildlife protection officers. 

  2. says

    Sadly ;

    I too was bamboozled into voting on Prop. 13 not understanding it would bankrupt us in a decade or two . -Nate

  3. says

    The real cause of the California fiscal crisis is the worthless PoS sitting in the Governor’s Office, Jerry Brown.  Back in his first administration, 1974-78, he had the chance to change California’s financial system and fix it so this would never have happened.  Willy Brown had a 2/3 Democratic majority in the Assembly and there was a 2/3 Democratic majority in the Senate.  Brown had a plan to reform property taxes so homeowners were protected and corporations continued  to pay the market rate (the opposite of Proposition 13).  All he needed was a little leadership from Governor Moonbeam, who was busy promoting “small is beautiful” and other such baloney with his 10-second attention span.  He was too busy “promoting change” to actually get involved in change, and the moment passed in 1976 when the post-Watergate majority was lost.  The result was Proposition 13, and today we have the worthless asshole whose moron stupidity created the problem voted into office to solve the problem. And he still doesn’t have a clue.

    How do I know all this? I worked for Willie Brown’s office at the time, and had the opportunity to observe Governor Moonbeam, the worst politician in the history of California, up close and personal. 

    And now here he is again, flailing around with his ignorance and incompetence because the alternative in 2010 was a wingnut bimbo who has gone on to prove she is even dumber than she seemed at the time.

    Poor California, poor us.  If I could afford to move out of this swamp, I’d be gone yesterday.

  4. Lauren from LA says

    The CFT and the Courage Campaign should never have backed down.  I guess they figured three tax increase proposals would be too confusing and people would vote them all down.  There’s one by Molly Munger that I read would raise taxes on people making $7500 a year.  I didn’t even think those people paid taxes.  Anyway, they should also be trying to close that loophole, I forget what it’s called, where when a business sells a property they somehow just transfer ownership so the actual tax doesn’t go up like it does when a homeowner sells a house.

    The whole system is so damn corrupt, the Occupy movement isn’t even participating in it.  We need average people to join us in the streets like in Montreal and Spain.  Real change is not going to come from politicians from any party.  They would never bite the hand that feeds them.  It must come from the people in the streets.

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