Why California’s seven year tax itch could be historic
The re-election of President Obama on Tuesday was undoubtedly an historic event – cementing universal healthcare, for example, and bucking the trend of anti-incumbency politics that has unnerved politicians in the developed world. But it may be that the ballot in just one – albeit important – state of the union was the crucial event on that fateful day.
The national and state election races in California saw Democrats triumph with thumping majorities (see below, and read about the election of the first Democratic mayor since 1988 in San Diego), and as more than one in ten US citizen lives there, it’s a pretty important state to win.
But more important is the story of two referenda 34 years apart. In 1978, California voted for Proposition 13 which capped state property taxes and is widely regarded as having marked the start of the global movement against taxation that has defined political life in the developed world for a generation. Last Tuesday, the Californians who sparked the ‘small state’ revolution may well have acted as midwives to its end by endorsing Proposition 30 by 54%:46%. They voted for a temporary (7 year) progressive increase in income taxes on Californians with annual incomes over $250k, $500k and $1m as well as a 0.25% sales tax increase (expiring after 4 years), to prevent $6bn in spending cuts this year alone.
A clue to the cause of this major turnaround in California is that, like much of the developed world, the gap between rich and poor has ballooned since the 1970s. The Financial Times reports (£) that:
“During the 1970s, the richest 1 per cent in the state earned 10 per cent of personal income – then about $135bn. Their share has since increased to 22 per cent, while personal income has soared to $1.8tn.”
Small wonder that opponents like the Koch brothers, who last year bankrolled Wisconsin Governor Scott Walker’s attack on union collective bargaining rights (he now has the first openly gay senator in US history to pay for his troubles!), donated $11m to the campaign against Prop 30. Other Propositions aiming to reduce union political activity (a running battle in California which has pushed the active California Teachers Association – CTA – to campaign even harder on political issues) and restrict GM foods, were lost in a sign that California is not a political mono-culture despite the Democrats’ electoral dominance.
The FT quoted Dean Vogel, president of the CTA, saying:
“If you are sick and tired of the ‘no new taxes’ rhetoric there is a way around it: go to the voters. Politics is personal and the best strategy is to get in front of people and talk to them.”
Those election results, by the way…
The ten million Californians who voted did so overwhelmingly for Obama (59%:39%). In some parts of the state Obama win by more than three to one, including 83% of the vote in San Francisco County. Democratic Senator Dianne Feinstein did even better, winning 61% of the popular vote and 88% in San Francisco. Nancy Pelosi, Leader of the Democrats in the House of Representatives, kept her San Francisco seat by 85% to 15% and wasn’t even the best performing Democrat in the House elections where the Democrats may have added as many as 4 seats to their previous tally of 34, eating into the Republicans’ previous tally of 19 seats in the state. Democrats also increased their grip on both houses of the state assembly. Will Governor Schwarzenegger be back? It looks unlikely…