Could We Actually End the CEO Defense Contractor Gravy Train?
FDR put the kibosh on military contractor windfalls during World War II. We could do the same.
If you want to see the future, political analysts used to say, look at California today.
That certainly held true back in the Reagan years. In 1964, after arch-conservative Barry Goldwater’s colossal defeat in the 1964 Presidential election, Californian Ronald Reagan deftly organized a winning “New Right” that swept first to state and then national power.
The “Reagan Revolution” of tax cuts, privatization, and deregulation — and virulent union busting — would leave the United States the most unequal developed nation in the world.
That inequality has, in turn, left tens of millions of Americans in debt, insecure, and incensed. And now that same inequality has ushered in the Epoch of the Donald.
But no one can credit — or blame — California for President-elect Trump. The two have no connection, and Californians rejected the Trump candidacy by nearly a two-to-one margin.
Today’s Californians are clearly not marching in step with most of the rest of America. And that raises an interesting question. Are Californians still leading us into the future or are they ambling toward some political dead end?
The answer may lie in a tax initiative that appeared on the November 8 California state ballot, a proposal that keeps the California state income tax rate on high incomes — the nation’s stiffest state tax bite on the rich and powerful — in place for the next dozen years.
Ronald Reagan, tax-cutter extraordinaire, would have detested this initiative. He hated high taxes on high incomes. In fact, Reagan’s personal march into the ranks of the political right began with his opposition to FDR’s record-high World War II taxes on the rich. President Franklin Roosevelt’s tax rates went all the way up to 94 percent rate on annual income over what today would be $2.75 million.
Decades later, as President, Reagan would shove the top-bracket federal income tax rate down to 50 percent and then, in 1986, down to a mere 28 percent.
Where did Reagan get the political momentum for his sweeping tax breaks for America’s most financially favored? That momentum would come from another historic California tax initiative, 1978’s Proposition 13.
Proposition 13 set a stiff constitutional cap on the state’s property tax rate and sparked a nationwide “taxpayer revolt.” Ronald Reagan rode that revolt right into the White House.
Prop 13 passed with just over 62 percent of the state vote cast. Prop 55 — the tax on the rich passed on Tuesday — also won with just over 62 percent of the vote, a telling stat, says Fred Glass, a leading communications strategist for the state’s fair-tax campaigning.
“California,” notes Glass, “is no longer the bellwether anti-tax, small government state conservative pundits proclaimed it to be after the passage of Prop 13 in 1978.”
Prop 55 builds on the success of a 2012 tax-the-rich state initiative that added, on a temporary basis, an additional 1, 2, and 3 percentage points on the state tax rate on income over $250,000, $300,000, and $500,000 per year. This earlier initiative brought the state tax rate on over $1,000,000 in annual income to 13.3 percent, the highest top-marginal state rate in the nation.
California’s corporate class spent $50 million four years ago in an unsuccessful attempt to stop that tax hike on the state’s wealthiest. But before Tuesday’s vote, Glass points out, “Prop 55 faced no serious paid opposition — a tacit admission by our foes that times had changed.”
Could times also be changing in the nation as a whole? Could the resounding success of California’s Prop 55 tax-the-rich campaign be a bellwether for a new national tax-the-rich politics that speaks to the anger at elites the Trump victory so dramatically signals?
Glass, a veteran activist and the author of a new history of the California labor movement, sees a real potential for that politics.
“Progressive tax policy,” he sums up, “is available again as a policy tool to address the ravages of economic inequality.”
Institute for Policy Studies associate fellow Sam Pizzigati co-edits Inequality.org. His most recent book: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900–1970. Follow him on Twitter @Too_Much_Online.