It’s becoming clear that, despite the efforts of the Zombie Death Cult to stop it, Californians are going to vote sometime between now and November 2012 on whether taxes will go up in order to ensure everyone can live the California Dream, instead of suffering in poverty, hunger, illness and without education or a job.
The question now is, what kind of tax proposals will we see?
Taxes need to go up across the board. Everyone needs to pay more. But whereas most working Californians need to pay only a little bit more, the rich and the corporations need to pay a LOT more. The state’s recession and its budget problems stem from the inequality caused by 30 years of successful conservative policy to create huge tax loopholes for the rich.
As wealth flowed out from public services and the pockets of the middle class and especially from low-income Californians, the pillars of the economy and the state budget eroded. It’s become a vicious cycle, creating bigger economic crises, worse budget deficits, and more dire living conditions for the Golden State.
So obviously the first step of any sensible tax reform would have to be reversing this process by jacking taxes up on the wealthy and the corporations.
After all, the evidence is clear that’s where the money is:
(Source: California Budget Project)
Corporations saw their income rise by 400% from 2001 to 2008. The average growth in wages and income for everyone else in the state was about 25%. That’s unequal and unjust. The corporations have our money, and it’s time we took it back.
Further, a higher corporate rate has been used in the recent past without causing problems for the state’s economy:
(Source: California Budget Project)
Between 1967 and 1980 the corporate rate rose from 5.5% to 9.6%. The first spike upward was, in fact, signed into law by Governor Ronald Reagan. California businesses did well in the second half of the 1970s and very well in the 1980s. Silicon Valley in particular thrived during these years. California’s schools were top-notch and higher education was still affordable. We are, in fact, living off the investments we made during those years, although they’re nearly exhausted.
So we can see a clear case for a higher corporate tax rate. What about a higher personal income tax rate?
(Source: California Budget Project)
Same here. If you want to go where the money is – and good tax policy suggests you should – then a higher income tax is a good idea too.
It’s especially significant when you consider that California has a single tax bracket for individual incomes between about $45,000 and $999,999. In other words, someone who makes just $50K a year pays the same income tax rate as someone making just under $1 million a year. It’s totally fucking absurd.
That’s why Californians want higher taxes on the rich. The recent “deliberative poll” by Next CA purportedly shows similar results, although they haven’t yet released that part of the poll.
Progressives, led by Fix California, are calling on Governor Jerry Brown to include a 1% tax surcharge on the incomes of the top 1% in the proposals he will help bring to the November 2012 ballot. That’s a damn good start to true tax reform. So too is the so-called “split roll” where the Prop 13 tax loophole is closed for commercial property, something Jerry Brown recently hinted he was open to doing.
Unfortunately, as Dan Morain points out in today’s Sacramento Bee, the wealthy corporatists have a different idea:
Although it’s too early to contemplate the 2012 general election ballot, politicos already are hard at work. California Forward, a nonprofit funded by civic-minded philanthropists, is among the groups working on initiatives, as is Think Long, which is funded by billionaire Nicholas Berggruen.
Writer Nathan Gardels, part of the Think Long group, laid out a tentative prescription for fixing state government and the initiative system. More detailed proposals will come by Oct. 1.
“Our idea is to reboot and install new civic software,” Gardels told me.
Gardels said the group is contemplating a ballot measure that would significantly cut income taxes, while extending sales taxes to services. The additional money – perhaps $20 billion extra a year – would go to local government and schools.
This is the wrong direction. Extending sales taxes to services IS a good idea – everyone needs to pay more to save the California Dream from collapse, but some people, like the rich and the corporations, need to pay a LOT more. Lowering the income and corporate tax rates are a huge step backward, and will produce more budget deficits and a weaker economy because, as the evidence shows, they will produce greater inequality.
In May 2009 conservatives opposed to taxes and progressives opposed to spending caps united to defeat Prop 1A. It’s clear that there is an electoral majority to oppose this kind of corporate-friendly crap. We know that conservatives will vote against a proposal that would extend sales taxes to services, even if it contained lower income and corporate tax rates. Their ideological opposition to taxes is that absolute.
So groups like California Forward and Think Long will have to count on progressives being suckers and voting for a bad deal that merely makes inequality worse.
Progressives need to say it loudly and clearly and say it now: no cuts to income or corporate tax rates will be acceptable. Any proposal that includes further cuts will be opposed by progressives. Those cuts are not options.
Instead, we need to raise both rates, and start on the upper end of the scale. Income and corporate tax rates ought to start rising, not falling, if California is to have a future of shared prosperity, high quality of life, and a population that is happy instead of suffering.
I am looking at the second graph. From 1960 to 1986 there’s a pretty clear relationship between the tax rate and the amount paid: when the tax rate went up to 7%, they paid ~7% in taxes; when it went to 9% they paid ~9%.
But then, after 1986, the amount paid fell rapidly. The rate fell a bit, sure, but not nearly as much. The rate is now 8.84%, apparently, but the actual amount paid has fallen to about 5.2%.
So there’s clearly something going on apart from the rate, and I’d like to know what that is.
“…a population that is happy instead of suffering”
Statements like this make it very hard to take you seriously. Suffering exists just below that wall that separates us from Mexico. Real poverty that is ugly and sad. The ABSENCE of capitalism and opportunity leads to the suffering we see down there.
There is know macro level suffering in this state. Just because you don’t have all the things you want or even some of the things you need does not mean you are suffering. Struggling maybe…
“Extending sales taxes to services IS a good idea – everyone needs to pay more to save the California Dream from collapse, but some people, like the rich and the corporations, need to pay a LOT more”
All this will do is pass costs on to the consumer or change business models (Hello Amazon affiliates!) Revenue can only have a real net positive effect from created value through economic growth. Anything else is just shifting money around to your desired demographic at the expense of others. And that expense invariably hits the middle class’ purchasing power the most. Expanding the sales tax to services would only exacerbate the problem. An individual is taxed on their income. I charge a sales tax on my services and then pay an income tax on that labor! Are you mad dude. Triple tax?!?!
You want sales tax on services? I’ll make you a deal eliminate the income tax and go flat on sales taxes. everybody would then have skin in the game. Can’t get fairer than that.
Even in the most distressed areas of this state people are still playing their Wii and eating pizza on Fridays. Sure their neighborhoods may suck and they may not work the greatest jobs, but that is not suffering. There is no government sponsored utopia out there my friend.
I understand ‘yalls goals of maximized equality. But in there speak of the internets “You’re doing it wrong” 🙂
As long as the tax rates get widened where earning 45,000 does not tax you at the next to highest rate, then let us go for it. We need to widen the tax rates so they would be fair and still raise revenue at the same time.
For a group that considers itself “Progressive” I find it odd that you guys advocate policies that had its heyday 50 years ago in the 1960s. Not really Progress in my book, but the GOP is stuck in the 80s so whats one to do.
Its a decent writeup Robert but it suffers from some of the usual problems. If you solve these riddles you might get your tax increases.
1) Tax&Spend. The whole philosophy of the Dems since FDR is to come up with a bunch of treats for its voter base and then make the constituents (in this case the rich backing the GOP) pay for. People know this. And people intuitively know what Maggie Thatcher stated too “The problem with socialism is that you eventually run out of other people’s money.” And thats where your problem is. If the left is able to successful take down a power beast like the rich and hit them with taxes people instinctivelt think “ouch, I’m next.” People see the rich (with all their lobbying dollars) as firewall from paying higher taxes themselves. And who can blame them? The democrat constituency is NEVER sated! There is always a new program, a new need to spend, another victim, another sob story. When the 16th amendment was passed few actually met the threshold to pay income tax, where are we now.
2) Credibility. It still amazes me that the 16th ever passed. Cuold you imagine if the amendment had a 100 year review period? Would it pass now? Back then people knew the funding will be well spent. It will be very hard to sell your tax increase when people ask how many new boards will get populated? What new regulation or law do they want to pass? Who is the empire-builder in the bureaucracy thats wants more office space. If you can link a tax increase with no new growth in govt hiring or offices etc you may have a better pitch.
Its getting late. I hope you enjoyed your Fourth!
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I am glad to hear Charles is not as heartless as he sounds. I do also, in fact, try to help out the less fortunate. And I agree my ex made some poor decisions. Others were not up to him–as is so often the case in life. But, if you’re willing to help feed the needy, why are you not willing to fund a safety net for the less fortunate here?
If nothing else, access to better health care would have saved the state a lot of money. He’d still be employed and paying taxes. And the state wouldn’t be paying the costs to keep him in intensive care now. It’s like deciding you’ll just replace the engine in your car instead of paying to change the oil. Talk about a poor decision!