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Millionaire's Tax On the Way in California? Backers Make Deal With Governor Brown

As progressive groups and unions make a deal to push for a tax increase on the rich coupled with a small sales tax hike, some wonder if they've compromised too much.
 
 
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On Wednesday, an advisor to Jerry Brown announced the suspension of signature-gathering on a tax referendum California’s governor had previously pushed for the November ballot. Brown’s move follows a deal reached last month with backers of a more progressive alternative, the “Millionaire’s Tax.” Unions that spent months backing two competing referenda have now coalesced behind a compromise—though not everyone from the old Millionaire’s Tax coalition is on board.

“This is a major improvement,” says California Federation of Teachers President Josh Pechthalt. Rick Jacobs, the chair of the labor-backed advocacy group Courage Campaign, calls the compromise “the most progressive tax” in California’s history.

As I reported in January, labor support was split between two tax referenda for November’s ballot. A year ago, the CFT (an AFT affiliate) and the Courage Campaign were among those spearheading a coalition, Restoring California, to push for the Millionaire’s Tax, a permanent levy on seven-figure incomes (under state law, referenda land on the ballot if they are submitted with sufficient signatures and legally-appropriate wording).

But in December, Democratic Governor Jerry Brown announced what he called a “balanced” alternative, combining an increase on upper bracket income taxes with a half-cent sales tax increase—both temporary. The plan was quickly endorsed (and reportedly pre-vetted) by some major unions—some of whose locals had previously endorsed the Millionaire’s Tax. 

Brown and his allies said that his plan was more responsible and would not inspire concerted business opposition; Pechthalt and others said that a sales tax was worse policy and worse politics (a separate tax measure backed by attorney Molly Munger is likely to also be on the ballot). Both sides expressed concern that having multiple measures on the ballot could lead voters to reject all of them.

But on March 14, they reached a deal. Brown and CFT are now circulating petitions for a compromise: a quarter-cent sales tax, combined with an increase on incomes over $250,000 a year. Both sides had agreed that Brown’s measure would remain in play in case the new compromise couldn’t get sufficient signatures in time, but it was pulled last week. The income tax under the compromise measure would last seven years, rather than five; the sales tax would last four. It will also be called the “Millionaire’s Tax.”

Pechthalt says it’s a victory worth celebrating. He notes that a year ago, Democrats and labor were poised to support even an “overwhelmingly regressive” tax proposal because “it seemed to be the only viable option for generating more revenue.” That attempt at a bipartisan deal died, says Pechthalt, only because Brown could not find Republicans to back it. He credits Occupy, student activism, and the Millionaire’s Tax for transforming the sense of what’s possible in the year since. Under the new measure, says Pechthalt, “the regressive piece has been cut in half.” In the first year, nine billion would be raised—two billion more will be raised than under the old Millionaire’s Tax, and eight of the nine billion would come from the income tax hike.

Pechthalt and Jacobs say that by March, both sides had increased motivation to compromise: Brown, because the Millionaire’s Tax was poised to make it onto the ballot; and the Millionaire’s Tax coalition, because they lacked the resources to win in the fall. With the Millionaire’s Tax consistently outpolling Brown’s proposal, Pechthalt says legislative leaders were warning the Governor that it could doom his proposal’s chances. Meanwhile, says Pechthalt, “we were not confident we would have very many resources to run even a very modest campaign.” “We were in a war—starting to be—on the progressive side of the structure here,” says Jacobs, “and that was not a good place to be.”

 
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