There is a fascinating round of politics being played in California right now on the taxation issue, and how it plays out will have a major impact on national politics over the next few years. A number of different political players are proposing
December 17, 2011

There is a fascinating round of politics being played in California right now on the taxation issue, and how it plays out will have a major impact on national politics over the next few years. A number of different political players are proposing tax-increase ballot initiatives, and it will take a while to sort things out, but there are some important things going on here that will have a spillover effect even on those of us living a long ways from California.

There are currently at least four different initiatives being pushed that would raise significant amounts of tax revenue. The most conservative and clearly regressive of these is backed by Arnold Schwarzenegger, Condoleezza Rice, and a collection of billionaires and multimillionaires. It would extend the state sales tax to services and increase taxes on some out-of-state firms, but would also lower personal and corporate income tax rates (most notably on the plan's sponsors). The $10 billion it raises would go for paying down state debt at first, and mostly education over the longer term. A second plan, which is hard to take too seriously because, as far as I can tell, it doesn’t have very much political or financial support behind it, would also raise about $10B, basically by raising income taxes on everyone but the lowest-income Californians, and put the money into K-12 and early childhood programs. It’s certainly a good proposal, but hard to imagine right now how it gains the support it needs to either get on the ballot or get passed if it did.

The final two initiatives are the most politically intriguing. Gov. Jerry Brown is pushing an initiative that raises money both from a half-cent sales tax increase and a modest increase on tax rates for people over $250,000 in income. It also constitutionally protects the shift in some expenses, including prisons, from state to local governments. The $7 billion raised goes into just about everything state government pays for: education, public safety, corrections, social services, but it primarily sends money to the counties. This measure expires in five years, meaning the whole thing will have to start all over again, which seems utterly insane to me. Meanwhile the Courage Campaign, the California Federation of Teachers, and a variety of other progressive California groups have launched an effort that is more clearly about the 99 percent vs. the 1 percent. It raises taxes on millionaires to restore cuts to education, specifically including higher education and local government services, such as the devastating cuts in health care for children and seniors.

From both a political and policy point of view, I don’t understand why Gov. Brown is structuring his initiative the way he is. It is murky and muddled and complicated to explain. It raises some taxes from wealthier folks, but the sales tax increase is a more regressive hit on the poor and middle class as any other kind of tax increase. Pushing expenses from the state onto very hard-pressed local governments is an accounting trick that helps the Governor balance his budget but does nothing to promote good public policy. Because of the complicated nature of this initiative, and the fact that it taxes everybody rather than just the 1 percent, this will be a lot harder to pass.

The Courage Campaign and CFT have written a clean, easy to sell initiative that is a straight up 1 percent vs. 99 percent play. It is written in a way to unambiguously promote progressive policies, and the politics of it make complete sense in this 99er movement moment. The progressive movement should come together and close ranks in support of this plan. Gov. Brown should drop his muddled mess of a proposal, and join forces with Courage Campaign and CFT. And progressives nationwide should look west to check out this model of how to do effective politics on behalf of the 99 percent.

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