Is it as simple as “tax the rich”?

September 8, 2009

Andy Libson, a teacher in San Francisco, proposes an alternative to the California budget crisis that doesn't involve massive cuts to programs that help working families.

YES. IT is. It's that simple.

This last year brought billions of dollars in cuts to K-12, community colleges and four-year colleges, California public works projects, and the Medi-Cal state health care services program.

The budget axe even struck the Department of Corrections. Some might be tempted to celebrate cuts in a California prison system filled with non-violent drug offenders and victims of draconian three-strikes laws. But there is no silver lining here either, since most of the programs on the chopping block involve rehabilitative services like substance abuse counseling, vocational training and education programs.

When Gov. Arnold Schwarzenegger and the state's Democratic legislators had to come up with a plan to overcome a projected $23.2 billion budget shortfall, their solution was to cut spending by $16 billion entirely in areas critical for working families: health care, education and jobs. Per pupil spending on K-12 students will drop from $8,257 to $6,918. The California Work Opportunity and Responsibility to Kids (CalWORKs) program will lose $528 million in funding.

California Governor Arnold Schwarzenegger
California Governor Arnold Schwarzenegger

The message is clear: The California budget shortfall will be paid for by working people--in particular, the most desperate and most disadvantaged.

Socialists believe the rich have a fairly simple solution for solving the budget crisis: Make workers, the poor, children and the elderly pay. We reject that answer and propose our own simple solution: Tax the rich.

Our solution is predicated on some basic principles. First, the rich should pay because they can afford to. A person who makes $50,000 a year and pays one-third of their income in various forms of taxes may not be able to afford rent, and certainly won't be able to buy a home--whereas a person who makes $500,000 a year and pays one-third of their income in taxes will, at worst, have to save their pennies a few extra years to afford that boathouse they had their eye on, or to trade in their Lexus SUV for a Jaguar.

And let's not forget that there are 101 billionaires in California who could end this crisis tomorrow and still have money left over to buy the Sacramento politician of their choice.

Bottom line: the rich should pay because they spend their entire lives marinated in money and excess.

BUT LOOKING at economic trends in California over the last two decades, there is a deeper reason that the rich should pay. Overwhelmingly, the rich are the ones who benefited from the tremendous economic engine that is the California economy--which ranks as one of the top 10 economies in the world as measured by gross domestic product.

Here is just a quick sketch of what the state's wealthy were able to do for themselves over the last decade alone. Between 2000 and 2007, total corporate profits tripled, while gross income for individuals, adjusted for inflation, went up by only about 28 percent. But even that lower individual income statistic is deceptive. Between 2000 and 2007, 60 percent of all income increases went to the top one-fifth of income earners. Income for the bottom 80 percent of earners in California went up 10 percent.

There can be no clearer picture drawn of the rich getting richer and corporations getting stinking rich than these few statistics provided by that hotbed of California radicalism known as the California Franchise Tax Board.

Did these wealthy few pay their fair share over the last few decades? No.

According to the Franchise Tax Board, 73 percent of all California corporations reported no profits last year and paid a flat fee of $800 to the state. The corporate tax rate has dropped from a high in 1983 of 9.7 percent to just 5.5 percent today. Overall, the portion of the state budget paid for by taxes on corporations is only 10 percent, while 50 percent comes from personal income taxes.

Let's look closely at the California state income tax statistics to see whether they reflect the situation where income for the richest 20 percent of Californians skyrocketed relative to the other 80 percent. Amazingly, the poorest one-fifth of income earners pay almost 12 percent of their income in taxes, while the richest one-fifth pay only 7 percent of their income in taxes.

This is the opposite of a progressive tax structure. It's not even a flat tax. I'm not sure what word best describes this tax structure. Regressive? Criminal?

By laying out these basic facts, it's clear that the California budget deal worked out with bipartisan support in Sacramento and the unequal tax structure it maintains are not only attacks on workers but a vigorous defense of the interests of the rich and their priorities.

Taxing the rich is the only solution that's fair, humane, just and completely affordable.

HOW AFFORDABLE? That's the fun part. Here are just a few ideas for getting the rich to begin to pay their fair share. Most of them can be found at excellent Web sites like the California Budget Project and the California Federation of Teachers.

Idea No. 1: Raise corporate taxes to the level they were at in 1983 under "tax-and-spend" Gov. Ronald Reagan. Additional state budget revenues: $8.4 billion.

Idea No. 2: Remove all tax breaks for California corporations from this past year and the previous one. Additional state budget revenues: $2.6 Billion.

Idea No. 3: Remove tax exemptions from capital gains for inherited property. Additional state budget revenues: $3.2 billion.

Idea No. 4: Raise the top bracket on income tax. Currently, income earners between $100,000 and $999,999 are all in the same bracket. Additional state budget revenues: $3 to $5 billion.

Idea No. 5: A California oil severance fee on Big Oil giants that are lining the coastline with their ghastly oil derricks. Additional state budget revenues: $1 billion

Idea No. 6: Reform Proposition 13 by repealing all property laws that exempt businesses from paying property taxes, while preserving those that protect working families who have owned their homes for decades. Additional state budget revenues: $3 billion.

These are just a few of the possible ideas that could completely pay for the budget crisis and leave our schools, health care and job programs completely untouched. These ideas aren't just realistic. They are the only plan that makes sense in a world run by anyone other than crooks and sadists.

Unfortunately, the world is run by these sorts of people, and if you don't believe me, check out a recent quote by "philanthropist" Eli Broad, who is described as a business mogul and Democratic donor in a recent article in the Wall Street Journal:

Mr. Broad [says] in no uncertain terms that it is time to get rid of education schools--"they're the lowest-ranking students at a university." And he is enthusiastic about all the change that is possible when urban school districts go bankrupt--as Oakland, Calif., did a few years ago--"or what happened in New Orleans, which is the equivalent of bankruptcy."

And this is from the liberal wing of the capitalist class. For these people, natural and manmade disasters are not to be feared or even avoided, but opportunities to be seized to use working people's fear and desperation to extract even more concessions.

This is why it is critical that our unions take a firm stand against any concessions around issues like layoffs, pay cuts, furlough days and benefit cuts. All these concessions are being justified with the language of "fiscal reality" and "shared sacrifice." Behind calls for these cuts lies the real project of the rich and powerful in California: the "shock doctrine" of union-busting, privatization and austerity.

Republican and Democrats are collaborating in Sacramento to hide this truth from us. It's the job of socialists, radicals and anyone else who is sick of giving in to the rich to put forward a clear path that says two things: "No more concessions, tax the rich."

It will take a fight by our unions to make the rich pay their fair share. But the starting point for waging this battle is for working people to understand that the money is there--and that we have to take it from them, or they will continue to take it from us.

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