It’s Time To Tax the 1% – Where Would the Money Go? Let’s Start With Education

Photo by Alicia Gibb via flickr.com

As we head toward 2012, there are a number of tax initiatives being proposed for the ballot next year.  What separates them?  Two of them, being put forth by activist millionaires, are largely regressive in nature aiming to bring in revenue by increasing income, sales, and other taxes on the majority of Californians in order to help fund education and other services.  The Governor’s plan is a combination of progressive taxation (starting with earners who make $250,000 and above) and regressive (a sales tax that will hit everyone).

Only the “Millionaires’ Tax to Restore Funding for Education and Essential Services” keeps its aim on the 1% and only the 1% by imposing a 3% tax on all earnings over $1 million and 5% on all earnings over $2 million.

This initiative sponsored by my statewide union would take a huge step towards building a better California by bringing in over $6 billion of much-needed revenue.  Where would the money go?

Specifically, the Millionaires’ Tax would allow us to:

• Re-hire laid off teachers to reduce class size
• Roll back college tuition increases
• Restore cuts to essential services for children and seniors
• Re-hire laid off emergency responders
• Create jobs by repairing roads and bridges

This initiative is superior to the Governor’s proposal for several reasons:

1. It upholds the principle of progressivity and asks the only group of Californians who have gained over the course of the last several years (millionaires) to sacrifice very little for the greater good.
2. It allocates expenditures in a broader and more inclusive manner, taking into account the various crucial needs of the state.  Education is a big part of it (since education is already a large portion of the state budget) but it also brings in funds for other vital needs that frequently fall by the wayside, such as care for the elderly and poor children.
3. It is the only initiative with a chance to pass.  Recent surveys show the Millionaires’ Tax starting with an approval rating in the 70% range and only moving a couple of points down to a 68% approval rating after the opposition’s arguments are introduced.  The other proposals with regressive elements don’t even come close (for instance, the notion of a more regressive “sales and income tax” ends up with 60% disapproval).  Thus even if you don’t care about the principle of progressive rather than regressive taxation or social needs other than education, you are still betting on a big loser if you go with the Governor’s proposal.  So if you care about schools and vital public services, go with the Millionaires’ Tax.

Who’s behind the Millionaires’ Tax?  This proposal is already backed by a wide coalition of unions and community groups including: the California Federation of Teachers, the Courage Campaign, California Calls, Alliance of Californians for Community Empowerment, California Partnership, Inner City Struggle, Equality Alliance, Community Coalition for Substance Abuse Prevention and Treatment, Strategic Concepts in Organizing and Policy Education, Dolores Huerta Foundation, Knotts Family and Parenting Institute, Communities for a New California, Oakland Rising, Causa Justa/Just Cause, The Ella Baker Center for Human Rights, Asian Pacific Environmental Network, CAUSE, Working Partnerships USA, Poder Popular, Warehouse Workers United, Congregations Organized for Prophetic Engagement, Mobilize the Immigrant Vote, PICO California, and the University of California Student Association.  Not millionaires or Sacramento politicians, but a true labor-community alliance of the 99%.

As Rick Jacobs, chair and founder of the 750,000 strong Courage Campaign says, “This is the only initiative proposal that would restore funding devastated by the recession, and rehire thousands of teachers, senior care providers and public safety personnel, without affecting the wallets of working families and the middle class. It addresses the heart of the problem: that total income share to the state’s richest 1% has doubled over the last twenty years, while their tax rates have fallen and the 99% have fallen farther behind.”

While some in the Democratic leadership and the house of labor feel obliged to take the path of least resistance and support the Governor’s plan, in doing so, they are accepting a strategy that links Brown’s assault on public sector workers’ pensions to any attempt at raising new revenue.  They are also sandbagging the progressive taxes by adding a regressive sales tax in an effort to appease business interests (the same variety of appeasement that has failed miserably and repeatedly at the state and national levels).  The curious thing about this latest episode of business as usual in Sacramento is that the pragmatic political argument in favor of this toxic deal doesn’t hold water, as the polling on the purely progressive measure is vastly superior to anything that includes regressive taxes.  More importantly, those supporting the Governor’s plan are ignoring the populist momentum of the Occupy Movement and buying into a compromise that makes workers pay for the sins of the 1%.

Clearly, given the choice, most rank and file union workers would prefer our plan, as would the general public.  If the Governor and his allies in labor’s leadership prevail in hijacking the promise of our initiative and killing it by tying it to regressive taxes and pension busting, it will be the worst kind of sell out by those who presume to speak for all of labor while failing to consult the rank and file, time and time again.  Hopefully, it’s not too late to change course.

This time we deserve better.

Feeling sorry for millionaires?  Don’t.  They are paying taxes at a lower rate than they did fifteen years ago during the Pete Wilson era.  Then they paid at 11%; today their rate is 10.3%.  Add to that the fact that close to half of their wealth comes not from income but investments.  Rather than creating new jobs, much of their wealth has come from activities that, as Paul Krugman points out, have more to do with “job destruction rather than job creation.” Indeed, over the last few decades they’ve run away with the store.  What’s happened?

A few columns back I noted that a Congressional Budget office report showed that “after-tax incomes for the top 1% shot up by 275% from 1979 to 2007” while the bottom 80% saw their share of income decline.  Bringing the point closer to home, the California Budget Project (CBP) just released a new study, “A Generation of Widening Inequality,” that indicated the same phenomenon happening here in the Golden State. In sum, the CBP found that, “a disproportionate share of income gains in recent decades has accrued to the very top of the distribution, in spite of continued productivity gains.  As a result, the gap between the incomes of those at the high end of the distribution and those at the low end and middle has widened significantly.”

A few more lowlights from the report include the facts that:

• Between 1987 and 2009, 35.5% of the inflation-adjusted income of all Californians went to the top 1%.  That means that $77.9 billion (an amount just less than the size of California’s 2011-12 budget) went to fewer than 144,000 people.
• 71.3% of income gains during this period went to the wealthiest 10% of Californians while 2.5% went to the middle fifth of the income distribution.
• The wealthiest Californians made significant gains while low and middle income Californians lost ground.  Thus the top 1% of Californians increased their inflation-adjusted income by 50.2% between 1987-2009 to reach an average income of $1.2 million.  Even the worst recession since the Great Depression failed to erase this decades-long gain.
• In contrast, for the middle fifth of Californians, income dropped by 14.8% to an average of $35,000 in 2009, the lowest level since at least 1987.
• The top 1% of Californians received 18.4% of income in 2009, up from 13% in 1987.  Thus one out of five dollars went to one out of 100 Californians in 2009.
• In contrast, the bottom 80% received 38.7% of total income, down from 46.6% in 1987.  Thus 2 out of 5 dollars went to 80 out of 100 Californians.
• California has one of the widest income gaps in the United States—the seventh biggest gap in America—putting us between Alabama and Texas.  In 2010, 6.1 million (or over 16%) of Californians lived in poverty (including 2.2 million children—over 23% of the total).
• In contrast 33,900 millionaire taxpayers (or 0.2%) had combined incomes of $104 billion in 2009.  That’s 11 times the income needed to lift every single Californian out of poverty.

Hence it’s certainly not time to pity millionaires.  It’s time for them to sacrifice a little for the greater good of our state and the future of our children.

To find out more about the campaign, pledge your support, and/or read the ballot measure in its entirety go to CFT.org.