Progressive Tax Policy

Thomas Piketty, in 2013, deemed it “perhaps utopian” but necessary, and admitted it would require a mass movement to come to pass. For André Gorz, in 1967, it was a “non-reformist reform.” Leon Trotsky, in 1938, argued it was a “transitional demand.” And for Marx and Engels, it was the first principle listed among “Principles of Communism.”

The “it”? Progressive tax policy. Though variable in form, fundamentally it is a way to redistribute society’s wealth more equitably. In this instance, Prop 15 proposes to remove one hated cornerstone of the early neoliberal policy edifice in California: it closes a corporate tax loophole that robs billions of dollars a year from schools and social services. The measure has been anticipated since 1978 by everyone who understood how badly that year’s Proposition 13 crippled the Golden State’s tax structure.

In nearly every other state, commercial property assessment is conducted on the basis of current market value. Yet in California, the tax paid by commercial property owners is 1 percent of its purchase price, no matter how long ago that transaction occurred or how much the property has appreciated since.

With an inflation factor capped at 2 percent per year, large corporations like Disney and Chevron underpay current market valuations by tens of millions each year. In a non-pandemic year, Prop 15 would raise ten to twelve billion dollars, or roughly 5 to 6 percent of the state’s pre-pandemic budget.

A Labor-Community Coalition

Prop 15 has been a decade in preparation, the product of a long-standing progressive tax coalition in the labor community, albeit one with shifting elements over the years.

Beginning with a millionaire tax proposal in 2011, supported by the California Federation of Teachers, California Calls, Courage California, and the Alliance of Californians for Community Empowerment, the coalition — which has swelled succeeding election seasons by other public-sector unions and community partners — successfully waged a ballot campaign (Prop 30) to bump up the state’s top income tax brackets in 2012. The highest is 13.3 percent for incomes over $1 million. Four years later, through the ballot measure Prop 55, the coalition extended that temporary tax increase through 2030.

Props 30 and 55, bringing in between seven and nine billion dollars a year, helped save the public sector in California, restoring tens of thousands of jobs lost to, and social programs devastated by, the Great Recession.

But commercial property tax reform never left the radar of the coalition, which bided its time for the right moment to collect signatures and to place a measure addressing it on the state ballot. The moment almost came in 2018, but the coalition backed off to wait for what was presumed to be a more favorable electorate in a presidential year. (It’s questionable whether the cataclysmic circumstances of the forthcoming election represent something “more favorable” — but this was impossible to foresee a couple years ago, and we’ll get the answer on November 3.)

Prop 15 would make a simple change to commercial property assessment, resetting its tax basis from purchase price to current market value. It explicitly excludes all residential and agricultural property, and, in a bid to neutralize small business opposition, sets the bar for reassessment to property worth $3 million or more.

Learning where Prop 15 revenue comes from provides one indicator of how deeply economic inequality rives the Golden State. The campaign estimates that 92 percent of the funds raised by Prop 15 would come from just the most valuable 10 percent of properties. Despite the furious teeth gnashing of the “No on 15” campaign ads featuring small business owners avowedly teetering on the Very Edge of the Abyss, few small businesses are actually in play. Prop 15 is aimed squarely at large property owners who can easily afford to pay market-rate taxes.

Forty percent of the revenues would go to K-12 schools and community colleges; and 60 percent to local services. The measure is less than perfect as the funding follows previously set state guidelines for spending. Thus the funding stream will flow to charter schools alongside other public schools (although not to private charters); and determination of local spending falls to governing boards like city councils, county supervisors, and special district boards, subject to political pressures per usual. The fight for proper allocation of the funds — say, away from police and toward social programs — will extend far beyond November 2020.

These concerning details, however, are more than offset by Prop 15’s progressive engine and the overwhelming need for more revenue. After decades of a neoliberal chokehold on taxes and social programs, commercial property tax reform had been viewed by progressive tax advocates as a partial answer to the structural underfunding of the state’s public sector.

Now, in the midst of the pandemic depression, which will reduce the state’s income by nearly a quarter, Prop 15 represents a tourniquet to stanch revenue loss rather than a way forward — just as necessary, but serving a different function from its original intent.

Two Gains

If Prop 15 passes, there will be two gains. It will be a concrete reform on behalf of the California working class, manifested in modest improvements in the daily lives of millions of students and other recipients of public services: transit riders, health clinic patients, parents who need childcare, and people who lack adequate firefighting services within the expanding perimeter of climate change–induced wildfires.

But its passage will also signify that the campaign has raised broad class issues in conversations with voters like the relationship between taxes and budgets, and economic inequality and social power; and has transformed these conversations not just into votes, but potential building blocks for class consciousness.

Large claims for a ballot campaign, you say. True enough. And first we will have to cut through the miasma of disinformation spewed by the opposition.

Besides promoting outright lies about Prop 15 (it will hurt small businesses, it will impact farms, and even channeling German pastor Martin Niemöller’s quote, “first they come for the commercial property, then they will come for homeowners”), the “No on 15” campaign has also cultivated shills like Villaraigosa, trading on his former progressive credentials; and Alice Huffman, longtime president of the California National Association for the Advancement of Colored People (NAACP).

Huffman has been unembarrassed in the past, even though her political consulting firm accepts big money contracts to work against various progressive ballot measures. This time around, she has cosigned the ballot argument opposed to Prop 15 alongside one of the most reactionary figures in California politics, Jon Coupal, head of the Howard Jarvis Taxpayers Association. The first flight of TV ads against Prop 15 features a grim black barbershop owner pre-mourning the death of his business if Prop 15 passes.

Funding against Prop 15, unsurprisingly, comes largely from real estate corporations and PACs organized by the Chamber of Commerce and Business Roundtable. But the messaging hides behind small business, relies on conservative public figures of color for delivery, and promotes the lie that this is a tax on everyone.

The “yes” campaign’s opinion research showed a winning path through attacking corporate greed, hammering on the tax loophole, and denouncing the yearly robbery of revenues that schools and communities need, in order to line the pockets of the already wealthy. Campaign contributions from the largest public sector unions in the state, like the California Teachers Association and Service Employees International Union State Council have been augmented by progressive foundation donations to support the TV, radio, and digital advertising of the “yes” side.

More Than One Goal

The primary focus of the campaign, of course, is to win. But for some of Prop 15’s supporters other objectives are important too: to build on the campaign themes in conversations with voters about the future direction of a society in deep crisis, and to cement stronger connections between the Left and labor. More than a dozen Democratic Socialists of America (DSA) chapters — and the national organization — have endorsed the Prop 15 campaign and created a loose but enthusiastic statewide structure to coordinate the chapters’ work on passing the measure.

The conditions of a pandemic election haven’t stopped DSA activists from participating in virtual phone banks and rallies, organizing internal educational forums on tax policy, and enrolling in the official campaign’s speaker training. The mostly younger DSA activists have also been more ready than most in this bizarre election season to mount public events — masked and socially distant — in outdoor spaces, like the simultaneous Labor Day car caravans and banner drops on freeway overpasses in several cities.

Union leaders and DSA-endorsed political candidates spoke at these events. In Oakland, Trent Willis, the president of International Longshore and Warehouse Union Local 10, Oakland Education Association president Keith Brown, and executive secretary treasurer of the Alameda Labor Council, Elizabeth Ortega-Toro, who normally would have been at their own Labor Day events, came out with the socialists to support Prop 15.

Letting Go of the Fear

For decades, common wisdom in California politics said Prop 13 was untouchable. The “third rail” of California politics, it was a sure death sentence for any elected official who dared to broach the possibility of its reform — or, for that matter, dared to raise taxes in general.

This perspective, of course, buttressed the neoliberal project of small government and low taxes on corporations and the rich. It simultaneously abetted austerity and allowed for the misdirection of public anger away from those actually responsible for decaying public services and deteriorating life prospects for everyone but the rich, toward traditional right-wing targets like immigrants, unions, and government itself.

Prop 30 and Prop 55 demonstrated that the political landscape was shifting. A growing proportion of the electorate, post–Great Recession and Occupy Wall Street, now understood the wealthy needed to contribute more to the common good. Prop 15, building on those experiences, provides a means to eradicate one mechanism that created some of the worst ongoing harm to social services and the vulnerable populations they serve.

November 3 will reveal whether the pandemic depression surrounding this election reinforces the ability of capital to win elections through fear and lies, or bolsters the labor-backed message that it’s finally time for corporations and the wealthy to pay more taxes.