If you look up “tone deaf” in the dictionary right now, you might find a photo of Nicholas Berggruen. He’s the billionaire investor who founded the “Think Long Committee for California” last fall to revive corporate friendly “reform” policies. In news that should shock nobody at all, their tax proposals involve shifting the burden away from the rich and corporations and onto what’s left of the middle class. From Capitol Alert:
A coalition backed by some of the biggest names in California politics and a billionaire financier is readying for the ballot a sweeping overhaul of the Golden State’s tax system….
Californians would pay sales tax on all services except health care and education starting in July 2013.
The tax hike would boost state revenues by about 11 percent starting in 2013-14. The money would help retire debt in the first year and later go toward K-12 schools, higher education and local governments.
The state would also simplify the personal income tax system in 2014, charging no tax on income up to $45,000 for joint filers; 2 percent on income between $45,000 and $95,000; and 7.5 percent on income above $95,000.
The state would eliminate all personal income tax deductions except those on mortgage interest, property taxes, charitable donations and research and development. The sales tax rate on goods would drop by half a percentage point.
On average, taxpayers at every income level would pay more due to the new service tax. Households with adjusted income below $20,000 would pay $71 more annually, though they may be eligible for a sales tax rebate.
The plan lowers the corporate tax rate from 8.84 percent to 7 percent. It also raises taxes on out-of-state firms by requiring them to pay based on their share of sales in California.
In short: corporate taxes go down, income taxes go down for everyone but especially for the rich, and the sales tax goes up (in fact if not in rate). The middle class – what’s left of it, at least – would shoulder the burden of taxation in California even more than they already do.
The article itself is strangely written, as if Torey Van Oot and Kevin Yamamura agreed to obscure the true nature of the proposal by not describing how the personal tax rates change from the present day. Here’s the current personal income tax rates for joint filers:
$96,058 and up: 9.3% (with a 1% surcharge for incomes over $1 million)
$76,008 to $96,058: 8%
$54,754 to $76,008: 6%
$34,692 to $54,754: 4%
$14,632 to $34,692: 2%
$14,632 and under: 0%
Under the Think Long plan, all the rates would go down, but the rich would see a big drop from 9.3% to 7.5%. And yet as the article notes, with the sales tax changes the overall impact would mean that everyone else pays more. Because the income tax would only kick in at $45,000 for joint filers, it’s the middle class that gets hit hardest.
It should come as no surprise that a billionaire’s proposal for California is to give himself and his wealthy friends a huge tax cut and screw everybody else in the process. I am not at all opposed to asking the middle-class to pay more, everyone is going to have to pay a bit more to reverse California’s slide into the abyss. But that should be a progressive solution that includes asking the rich to pay a LOT more than they currently do, not asking them to pay less.
It’s also rather stunning to see this proposal come out as Californians have begun taking to the streets to protest policies exactly like this that favor the 1% at the expense of the 99%. Berggruen and the members of the Think Long Committee that are giving him cover have either not paid any attention to the Occupy movement or do not think it has much influence.
Still, it is difficult to see how this proposal stands a chance of passage. Voters aren’t stupid – they might like the income tax cuts, but will revolt at paying more sales tax, especially as they see the rich and corporations getting a big tax cut.
The proposal takes California in the wrong direction. There’s no doubt the state is in crisis. College is becoming unaffordable. K-12 schools may have to cut a week off of the school year. Millions are without guaranteed health care. Unemployment is at 11.7%. To solve those crises, government needs to step in and rebuild the middle class by providing free college, by massively investing in K-12 schools, by providing free and universal health care to everyone, by directly hiring people who need work, and by building out a 21st century infrastructure that will save money by reducing dependence on oil.
Making that happen requires going after the wealth currently controlled by the 1%. Income tax rates on them need to go up – way up. Higher tax rates on the rich and on corporations will actually spur economic growth by rebuilding the middle class, giving people the space and support they need to innovate, create jobs, and repair their balance sheets.
If Berggruen wanted to actually do something to help California, he would take the $20 million he is pledging to spend on this shockingly regressive proposal and instead invest it in an initiative to raise taxes on the rich, on corporations, and to fix the state’s unfair property tax system. Instead he’s using it to help himself and his friends get even richer.
This proposal is worse than a joke – it’s an insult. It should be denounced early and often.