By Avoiding Tax Democracy, Bad Ideas Spread
This column is co-published with Zócalo Public Square. Photos by Joe Mathews and Steve Hymon
Be sure to spend some time marveling at the 14 statewide measures on November’s California ballot.
Because this is no ordinary ballot. No, this is history. A political marvel. A towering monument.
To nearly a half-century of California’s fundamental failures of governance.
Since the passage of property tax limitation Prop 13 in 1978, Californians and their leaders have abandoned serious work in two areas: creating an integrated coherent tax system and building housing. Into this void have stepped unions, corporations, billionaires, and others who seek to use the ballot to seize money for selfish pursuits.
This reality is on display on the November ballot, and particularly in Proposition 40, the so-called “wealth tax.” Your columnist reads every word of every statewide ballot measure in every election. And Proposition 40, by my lights, is the most cynically conceived, incompetently drafted, and politically counter-productive measure to reach a California ballot in the 21st century.
It’s how you would write a wealth tax if your goal was to discredit the idea of wealth taxes.
Prop 40 poses as a solution to major problems—wealth inequality, Trump’s federal budget cuts, and California governments’ need for more resources—and addresses none of them. This one-time 5% tax on the net worth of billionaires features a variety of exemptions and could be net-negative long-term, as billionaires move (or pretend to move) their domiciles and companies out of state to avoid it.
But the worst part of Prop 40 is how it spends the money. A smart wealth tax could help Californians, especially those with very little, build their own net worth, perhaps by giving them ownership in the immense riches generated by the most affluent Californians. (The best concept for such shared ownership is called universal basic capital). Or it could produce money for the state general fund, which supports California’s many diverse needs. Instead, this measure would throw 90% of dollars into our broken, ineffective health care system. This structure makes sense when you realize that the measure was drafted by a union representing health care workers, who are the real intended beneficiaries of the tax.
The political idiocy of this approach is staggering. By walling off a massive, temporary revenue stream for one specific sector, Prop 40 managed to alienate education advocates, many progressive Democrats, and anyone else who relies on the state budget. That’s why the outgoing governor, the incoming governor, and the powerful California Teachers Association—all of whom would like more tax revenues—are opposing the measure.
In response, the billionaire targets of the wealth tax could have been the good guys and used their influence to advance thoughtful tax reform. Instead, they have chosen the path of villainy, seeking retribution against everyday Californians by qualifying Propositions 41 and 42 for the ballot. Under the supposed guise of local accountability and protecting your retirement income, both add limitations on taxes on top of Prop 13’s longstanding rules, making it harder for local communities to raise revenues and invest in themselves. Prop 43, placed on the ballot by the Howard Jarvis Taxpayers Association, is another anti-democratic limit on local finance.
The fact that billionaires and labor unions have so many millions to wage this fall’s campaigns for and against these measures is evidence that the public should be grabbing more in taxes from rich and entrenched interests.
No tax measure on this year’s ballot benefits the long-term public interest. To be fair, the legislative constitutional amendment Prop 3 makes permanent a voter-approved 2012 income tax increase that was supposed to be a temporary budget stopgap. But it must do so because, in the last 14 years, California has punted on coming up with a better way of replacing those revenues.
Another legislative measure, Prop 2, is more evidence of failure. It is an attempt to expand the state’s rainy-day fund that sounds prudent but is in fact a dodge. It treats a symptom—volatile revenues—while ignoring the disease—our crazy tax system.
The housing measures on the November ballot reflect both California’s funding problems and its housing failures. Prop 1 and Prop 37 would borrow money, and Prop 45 would ease environmental protections, to increase housing production. Such changes would be unnecessary if we had changed our tax system to encourage local governments to build housing. (Right now, local governments approve retail because it produces sales taxes that goes to their budgets; if local governments received more revenues or taxes from housing, they’d build more housing.)
Of course, one big reason why California can’t do tax reform is that its people lack the modern tools—like participatory budgeting, deliberative assemblies, and open-source governance platforms—to enact their own ideas and solve problems directly.
Instead of focusing on democratic practice and agency, the state’s short-sighted good government groups spend their time and money on elections. In Prop 4, so-called reforms would make it easier to put public dollars into an election system already saturated with money. Prop 5, a “recall reform,” eliminates the power of voters to replace corrupt politicians on the same ballot, thus discouraging recalls and protecting failing incumbents. (Why recall the governor if you’re going to get stuck with the lieutenant governor for the time being?)
Then there’s Prop 39, a Voter ID ballot initiative backed by donors to President Trump. The measure is at best pointless, since people impersonating voters is not a significant problem in this state or country. Would-be election cheaters, like Trump himself, have tried to corrupt the counting of ballots instead.
Understanding all this, you may just vote no on everything. Or throw your ballot in the trash. I’d suggest that you instead devote your energy to historic, comprehensive tax reform.
The federal government is robbing California by lawlessly slashing federal funding for vital programs—even as Californians heavily subsidize the rest of the nation through federal income taxes. Instead of being distracted by ballot measures, California should focus on designing aggressive, state-level vehicles to limit the outflow of federal tax payments from our citizens.
As an interim measure, state leaders should organize and sanction a federal tax strike for 2027. Longer term, we should pass state laws that maximize federal deductions, shelter local industries, and redirect the wealth currently bleeding out to Washington into California-based programs and private in-state investment.
This conversation doesn’t have to start at zero. Californians could begin by reviving the state’s bipartisan Commission on the 21st Century Economy from 2009, which offered a structural solution: reduce personal income taxes, eliminate the corporate income tax, and introduce a broad “business net receipts tax” to boost and stabilize state revenue. A few years later, the Think Long Committee for California (organized by the Berggruen Institute, where I’m now a fellow) spent months modeling 23 different tax scenarios and proposed lowering income taxes to keep California competitive while broadening the sales tax to include services. The committee’s projections showed this package would generate an additional $10 billion annually and stabilize revenues.
In both cases, political leaders ignored the reform proposals.
The result? The ballot you’re looking at.
If you don’t wish to see a similarly nasty piece of work in your mailbox in 2028, now is the time to get busy doing the tax and governance work Californians have avoided for 50 years.
