Democratic Governors in California and New York Looking to Put Final Squeeze on Middle Class
A bit over a half century ago, in the years right after World War II, the United States delivered up onto the global stage something the world had never before seen: a mass middle class.
For the first time ever, a majority of a major nation’s people had “disposable income” -- real money left over after paying for basic food and shelter.
Two states, New York and California, would serve as geographic bookends to this colossal achievement. The duo offered “ordinary people,” as historian Kevin Starr has chronicled, lives unimaginable anywhere else in the world.
Activist government made those lives possible. Government-subsidized loans raised new middle class suburbs from potato fields and sugar beet acres. Tax dollars funded new infrastructures in energy, water, roads, schools, and parks.
“California’s children, swarming on all those new playgrounds, seemed healthier, happier, taller,” as Atlantic editor Benjamin Schwarz has noted. “A sweet, vivacious time.”
A time we may never see again. The two newly elected governors of New York and California, both Democrats, have essentially declared America’s mass middle class ancient history.
Both governors, Andrew Cuomo in New York and Jerry Brown in California, are now pushing “a fundamental realignment” that goes beyond the budget cutbacks that have become a grim annual state capital routine all across the nation.
Both are attacking the foundational core of America’s middle class golden age, the notion that the public policies we choose, the public goods we provide, can create better lives for ordinary people. Instead, both are pushing their respective states to abandon those public goods — and coming down hard, with wage cuts and layoffs, on the public employees who provide them.
A half century ago, back in our middle class golden age, no public good meant more to Californians than their remarkable system of public higher education. Every California high school grad had access to free community college. High-achievers attended, at tiny tuition rates, some of the world’s finest universities.
The governor who signed the 1960 law that created this magnificent higher ed network? Jerry Brown’s father Pat. Now today, under the budget plan son Jerry is avidly promoting, revenue from student fees will exceed the state government contribution to higher education -- for the first time in California history.
Brown says he has no alternative.
“This is the world we live in,” Brown has pronounced. “You can’t manufacture money.”
But governments can raise revenue by taxing their most affluent. Back in America’s middle class golden age, that’s what governments did.
Brown is refusing to go down that road. He does want to continue a set of temporary tax hikes put in place before his election. But these hikes -- 1 percent in sales tax, 0.5 percent for vehicle licenses, 0.25 percent across the board on the state income tax -- all fall heavier on middle- than high-income Californians.
In New York, Andrew Cuomo isn’t willing to raise taxes on the rich at all. His rationale for that refusal?
“The working families of New York,” Cuomo says, “cannot afford tax increases.”
What does what working families can afford have to do with taxing the rich? Cuomo defines “working families” to include the wealthy. Explains Cuomo: “They work, too.” Indeed they do. But under current law New York’s wealthy actually spend less of the income in state and local taxes than ordinary New Yorkers.
New Yorkers making between $33,000 and $95,000, analysts Chloe Tribich, Sunshine Ludder and Ron Deutsch pointed out last week, pay 11 percent of their incomes in state and local tax. New York’s richest 1 percent -- taxpayers making over $633,000 -- only see 7 percent of their incomes go to state and local taxes.
Decades ago, in the middle class golden age, New York’s wealthy faced a far heavier tax burden. In fact, since 1980, the top state tax rate on New York’s highest incomes has dropped by half.
So has the top federal tax rate, from 70 to 35 percent.
This shrunken federal tax rate on oversized incomes, observes Demos think tank senior fellow David Callahan, gives governors Cuomo and Brown a painless escape route out of the budget squeeze that now endangers their middle classes.
New York and California alone, notes Callahan, have more taxpayers making over $200,000 than all 22 states that John McCain carried in the 2008 Presidential election. These high-income taxpayers, under last month’s federal tax deal, will now enjoy at least another two years at the discount 35 percent top federal tax rate that George W. Bush shoved into place back in 2001.
Without this extension, the most affluent in California and New York would be paying federal taxes at a 39.6 percent rate. So why not, suggests Demos analyst Callahan, raise state tax rates -- from 10.5 to 15 percent in California and from 8.97 percent to 13.5 percent in New York -- to make up that difference?
High earners would then pay, with these higher state rates, about “the same overall tax rate they would have if the Bush tax cuts weren’t extended.”
Don’t hold your breath. Neither Brown in California nor Cuomo in New York sees any reason to inconvenience the financially fortunate. We’re just “going to have to reduce government spending,” as New York’s Cuomo insists.
For the awesomely affluent, that makes sense. Rich people, after all, don’t use public schools and parks and libraries. To live the good life, they don’t need government spending much money on all these public goods.
Only the little people do.