Working In These Times
In California, Competing Tax Hikes Divide Organized Labor
Gov. Brown’s 'balanced' proposal splits 'millionaire’s tax' coalition.
California voters can expect competing tax hike measures on November’s ballot—and competing campaigns from major unions. Last month, Governor Jerry Brown announced a campaign for a ballot measure that would impose a five-year tax increase on incomes above $250,000, paired with an across-the-board sales tax increase. That proposal has siphoned attention, and supporters, away from a months-old alternative: the campaign for a permanent tax hike on income over $1 million.
Budget crises are a near-annual event in California. Unlike the federal government, states (except Vermont) are bound to balance their budgets, and unlike big banks, states aren’t bailed out with zero interest loans from the federal government. Worse, California’s 1978 Proposition 13 capped property taxes while requiring two-thirds majorities for the legislature to raise taxes.
Thus even large legislative majorities are unable to raise taxes, while California’s referendum system enables a bare majority of voters to impose spending mandates. All of these factors contribute to California’s projected $10 billion deficit for the coming fiscal year, and to the urgency surrounding proposals to close the gap.
California progressives have long sought to overturn Prop 13, and to see the state’s budget balanced through taxing the rich rather than cutting public services. Following collaboration in the 2010 elections, unions and progressive groups began meeting last spring—and holding polls and focus groups—to formulate a tax proposal for the November 2012 ballot. This “Restoring California” coalition included the labor-backed progressive organizing group Courage Campaign, the AFT-affiliated California Federation of Teachers (CFT), and—until recently—several SEIU locals.
Jerry Brown, California’s Governor from 1975 to 1983, had long shed his reputation as ultra-liberal “Governor Moonbeam” by the time he returned to the governor’s office last year. Like fellow big state Democratic Governor Andrew Cuomo, he’s emphasized the need for “shared sacrifice” as a solution to the enduring recession.
When rumors circulated this fall that Brown was working on a tax proposal, Restoring California sought a meeting to ask his support for their millionaire’s tax. Joshua Pechthalt, president of the 100,000 member CFT, charges that SEIU may have worked to prevent such a meeting from taking place. “I think unfortunately SEIU had other things in mind,” says Pechthalt, “and bringing our coalition together with the Governor may not have been what they wanted to see happen.”
Pechthalt says he had hoped that SEIU’s California State Council, which represents 700,000 members, would formally endorse the Restoring California proposal at an Executive Council meeting held November 29. Instead, he says that following SEIU’s meeting he received word from the SEIU locals in Restoring California that they were leaving the coalition because the State Council had voted to support Governor Brown’s proposal, and had barred locals and staff from continued involvement with Restoring California.
Pechthalt says he suspects that SEIU is seeking "some benefit to supporting the Governor in terms of legislation that they want. So a little bit of tit for tat."
Brown publically announced his plan on December 5. Based on undisclosed sources, Editor Randy Shaw reported the same day on the Bay Area progressive website BeyondChron that SEIU and AFSCME had decided to back Brown’s plan. Bloomberg Businessweek, in a preview of the announcement on December 2, reported that the plan had been "vetted with top Democratic lawmakers and union leaders."
In an e-mail yesterday, SEIU California Communications Director Michael Cox said that SEIU “has not yet announced a public position on the Governor’s tax plan. We will make an announcement at the appropriate time, but not before.” Cox said it would be “inappropriate for me to further discuss our internal decision-making process,” but that “Speaking generally, we need new revenues. The cuts-only approach hasn’t worked.”
In an interview with the San Jose Mercury News, Brown acknowledged that a sales tax lacks the popularity of taxing millionaires, but said that he included it because “I thought we ought to have a balanced program.” Pechthalt retorts that working-class families most affected by a sales tax have “already given up their pound of flesh in terms of lost services, in terms of people taking forlough days and pay cuts. They’ve been paying their taxes…So if we’re talking about balance, it’s now time for people at the top to do their part.”
Supporters of both Brown's proposal and Restoring California's have expressed optimism about reaching a compromise measure that progressives can unify behind. But following a late December meeting with Governor Brown, Pechthalt says that’s unlikely to happen.
The California Attorney General’s office is slated to release official ballot language for the Restoring California proposal and Brown’s – along with two other tax proposals – later this month. At that point, advocates will have until mid-April to file signatures to get their favored measures on the November ballot. Pechthalt says that only the millionaire’s tax “will energize grassroots folks and rank-and-file union members.”
A Brown adviser told the Los Angeles Times that the governor’s proposal represents the “common ground” capable of drawing the necessary support from labor, business and local municipalities. The Sacramento Bee reported that in two weeks, the campaign for Brown’s initiative raised $1.2 million from nine donors, including $500,000 from the California Association of Hospitals and Health Systems (whose parent organization includes major SEIU employers like Kaiser), $300,000 from American Indian tribes with casinos, and $250,000 from a building trades union PAC.
The anti-tax Howard Jarvis Association has expressed hopes that, as sometimes happens in California, voters faced with competing measures on the same topic will reject all of them. Governor Brown has raised the same possibility, warning that competing proposals could sow “chaos and confusion.” Brown is proposing an automatic trigger that would impose $7 billion in cuts if his measure is defeated. If more than one of the measures passes, it will likely fall to a judge to determine how many become law.
Along with CFT and nearly two dozen community organizations, the millionaires’ tax proposal has the support of the Northern California Council of the International Longshore and Warehouse Union (ILWU), and of UAW Local 2865, a graduate student workers’ local active in the Occupy movement and the ReFund California coalition.
Pechthalt says he expects other unions to come on board in the coming weeks, and that the coalition is in talks with the California Teachers Association (CTA), a National Education Association (NEA) affiliate which represents 325,000 teachers and has budgeted $8 million for 2012 ballot initiatives. But in an October interview with the Bay Area News Group, CTA President Dean Vogel expressed concern that the Restoring California proposal could raise “far less than what’s needed,” and emphasized the importance of a unified front.
Like other unions, CTA, SEIU, and CFT have all been vocal in support of the Occupy movement, which has condemned an economic and political system that serves the top 1%. The millionaire’s tax “resonates with the current politics,” says Pechthalt, “what’s going on in the streets…We’re in a period where the landscape is shifting, and what might not have been possible before is possible now.”