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California Raised Taxes On The Rich: Your State Can Too

Last year the California Federation of Teachers spearheaded Prop 30, the single largest progressive tax passed in the state since World War II.
 
 
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Photo Credit: flickr: UCL Occupation

 

“There is no alternative to austerity,” insist the rich, along with their politicians, foundations, think tanks, and media.

They’ve been saying it for decades. “Taxes are bad,” they also claim. “Government doesn’t work. And public employees are greedy.”

Consequently, common wisdom had it that “you can’t raise taxes.” Even people who should have known better believed this—while the public sector slid down the tubes.

So how did Proposition 30 succeed? This measure, passed by voters last November, raises $6 billion a year for schools and services—in California, a supposedly “anti-tax” state. The money comes mostly through an income tax hike on rich people, along with a tiny sales tax increase of ¼ percent.

The story should be better known, because with the right preparation, you could make it happen in your state, too.

TESTING THE WATERS

Shortly after Democrat Jerry Brown was elected governor in November 2010, the California Federation of Teachers (CFT) pulled together labor and community groups to craft a ballot measure to raise the revenue needed to keep schools and services afloat.

For two years we had been laying the groundwork for a progressive tax: creating educational materials, publishing opinion pieces, holding training sessions with our members and other unionists, and talking with potential coalition partners.

We funded polls and focus groups, testing how likely various types of taxes would be to gain a majority.

Regressive taxes—like sales taxes and across-the-board income tax hikes—were viewed unfavorably. By spring 2011, people felt ordinary folks had already sacrificed enough, in the worst recession since the 1930s.

The public believed, however, that the rich and large corporations needed to pay their fair share for the common good. They were quite willing to vote for higher taxes on the rich.

As we refined our research, we decided on three principles: bring in the most revenue possible; draw it from those who could most afford to pay; and have the best chance of winning. We arrived at a Millionaires Tax: people who made a million dollars a year would pay an extra 3 percent, and people making $2 million an extra 5 percent, raising $5 billion a year.

Unfortunately, Governor Brown had his own proposal that didn’t follow those principles—it included both a half-cent sales tax hike and an across-the-board income tax increase. People were out gathering signatures for Brown’s initiative, our Millionaires Tax, and a third tax measure sponsored by a wealthy liberal attorney.

The Millionaires Tax ran ahead of the other measures in five straight polls.

In early March 2012, the CFT helped organize a march in the capital against budget cuts and college tuition increases. Thousands of students, faculty, and others paraded Millionaires Tax signs outside the governor’s window.

Two days later, responding to the governor’s charge that three competing measures would all lose, we released the results of a poll testing that idea. It found the others would get less than 50 percent, and the Millionaires Tax would win handily.

At that point the governor called in CFT President Joshua Pechthalt to talk. We compromised and combined the two proposals into Prop 30. The new measure raised the top tax rates on income of $250,000 by 1 percent, on $300,000 by 2 percent, and on $500,000 by 3 percent. We had wanted a permanent tax; Brown’s was for five years. The compromise extended that to seven.

We knew the sales tax was a poison pill and we requested that Brown drop it entirely, but he explained that, to keep the Chamber of Commerce neutral, he had promised not to “demonize the rich,” meaning there had to be a “shared sacrifice” component. He did agree to reduce it to a quarter cent.

 
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