Bulldozing Away the Right to Tax the Rich

A sizeable share of America’s pundits and politicians have — with good reason — been spending the last several days bemoaning and bewailing billionaire Elon Musk’s latest business gambit: a $44-billion annexation of the social media universe known as Twitter.

One member of Congress, Chuy Garcia of Illinois, is calling the Musk move “a vanity project boondoggle to silence” Musk’s many critics. Senator Elizabeth Warren has dubbed the deal “dangerous for our democracy.” Elon Musk, adds former U.S. labor secretary Robert Reich, is confronting us with a “brave new nightmare.”

But the danger our democracy now faces goes well beyond the antics of one individual mega-billionaire. We suffer in our midst an entire shameless plutocratic class, a frightful collection of grand fortunes that poses a clear and present danger to any attempts we make at democratic deliberation.

“Rich people want to control terms of discourse,” as analysts Dan Primack and Sara Fischer observe in Axios. “They always have and always will.”

And most of these rich seldom get even a tiny fraction of the notoriety that has come the way of Elon Musk. Take, for example, the national yawn to the latest anti-democratic shenanigans of Arizona’s awesomely affluent.

This particular story began last year when Arizona’s lawmakers passed and governor Doug Ducey signed into law a massive, near $2-billion tax cut that, notes the Associated Press, “mainly benefits the wealthy.”

Arizonans of more modest means did not take kindly to this generosity. They quickly seized on a provision in the Arizona state constitution that gives state voters the power to block a new law from going into effect if they can collect enough petition signatures statewide — at least 5 percent of all qualified voters — to force a statewide referendum.

Opponents of Arizona’s latest giveaway to deep pockets did just that, collecting almost double the number of required signatures. But then the rich and their chums in the Arizona Free Enterprise Club went to court and asked a local district judge to throw out the petition signatures. Voters, Arizona’s plutocrats argued, had no state constitutional right to a referendum on enacted legislation that provides “support and maintenance” of state government.

Maricopa County superior court judge Katherine Cooper rejected this Arizona Free Enterprise Club case. The state constitution, she noted, only blocks voter referendums on legislative moves that involve appropriations. The tax cut for the rich voters were challenging makes no appropriations.

But Arizona’s political friends of grand fortune had prepared for an independent-minded judge like Cooper. In 2016, on a straight party-line vote, state lawmakers had expanded the size of the state’s Supreme Court from five to seven justices, a move that gave the state’s Republican governor, Doug Ducie, a chance to pack the state state’s top judicial body. Ducie took full advantage of that opportunity. By earlier this year, he had appointed six of the Arizona high court’s seven justices.

In mid-April, those six voted to overturn the lower court ruling and squash a statewide vote on the GOP’s rich people-friendly tax cut. A “big win for taxpayers,” crowed Free Enterprise Club president Scot Mussi. An accurate claim — as far as wealthy taxpayers go. The controversial “flat tax” enacted last year sets the same tax rate, 2.5 percent, on all state taxpayers. Once fully effective in 2024, this flat rate will save Arizonans making at least $1 million about $45,000 a year. Those affluents making over $5 million will clear nearly an extra $350,000 annually.

The state’s poorest income-earners? They’ll save an estimated $4 a year.

State public schools, meanwhile, will lose billions in aid they can’t afford to lose. Arizona, a state that ranks 18th nationally in millionaire households, ranks 49th nationally in per-pupil funding.

On a practical political level, charges Beth Lewis of Arizona’s Save Our Schools coalition, the state high court’s rejection of a referendum that large numbers of Arizonans clearly want to see take place signals the “end of democracy.” A “true democracy,” agrees state Senate minority leader Rebecca Rios, would “have no problem allowing” the voters to decide whether the schools or the wealthy should come first.

Arizona’s plutocrats seem to have a problem letting voters directly decide much of anything related to education — or taxes. Two years ago, in 2020, the state’s voters gave the green light to Proposition 208, a ballot initiative that placed a 3.5-percent tax surcharge on income over $250,000 for individuals and over $500,000 for couples, with all the proceeds going to funding public schools.

But this past August the state Supreme Court came down with a ruling that essentially forced a lower court to throw out the Prop 208 vote on technical grounds.

“Arizona’s highest court,” the Children’s Action Alliance and the Arizona Center for Economic Progress jointly sum up, “is stripping the rights of everyday Arizonans, in an attempt to protect the rich.”

In other states, plutocrats haven’t been quite as successful — in swatting away inconvenient voter initiatives — as their Arizona brethren. California voters, for instance, have been able to enact statewide propositions that raise taxes on the rich to better fund mental health and education. And this coming November, the state’s voters now seem almost certain to have a shot at passing a proposition that aims to “tax the rich to save the planet.”

Under this new initiative, the “Clean Cars and Clean Air Act,” Californians making over $2 million a year would pay an added 1.75 percent of their income in tax, at least an extra $35,000 annually. The measure, if passed, would raise between $3 billion and $4.5 billion every year through at last 2033.

Statewide ballot initiatives have been around ever since the earliest days of American independence. The first such direct balloting traces all the way back to Massachusetts in 1778. But our contemporary direct-democracy options didn’t take modern shape until Progressive Era egalitarians pushed back, over a century ago, against the super rich of the first Gilded Age.

We now have generations of initiative and referendum experience under our belt, with the most important lessons from that experience coming since 1978, the year “mad as hell” right-wingers in California won passage of Prop 13, an initiative that capped property taxes at 1 percent of a property’s original value. That high-profile vote ignited a nationwide “taxpayer revolt” that led directly to Ronald Reagan’s election in the 1980 presidential election, a landmark moment in America’s march to a new Gilded Age of obscene income and wealth inequality.

Since then, initiatives and referendums have regularly, but not always, ended up with the rich in the winning corner. Why haven’t initiatives and referendums done more to showcase the “people’s voice,” as early 20th-century advocates for direct democracy had hoped they would? Statewide votes on issues have evolved into big-buck battles, and getting the people’s voice heard — amid these battles — has come to take herculean fundraising efforts just to get within hailing distance of the financial might the rich can bring to bear. And those can rich can end up prevailing, as the example of Arizona this spring shows, even when they lose at the initiative and referendum ballot box.

None of this will change until we figure out how to — once and for all — trim grand personal fortune down somewhere close to democracy-friendly dimensions.

Sam Pizzigati co-edits Inequality.org. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.