Why the Millionaires Tax Was  Worth Fighting For; Another Reason for All Educators to Back the CFT

by Mark Brenner of Labor Notes | Tue, 03/27/2012

The tax compromise made by the California Federation of Teachers resulted in major improvements to the ballot initiative that could be in front of voters in November. But backers of the millionaires tax should have bucked the governor's deal and continued their struggle to reverse endless austerity. Photo: Steve Rhodes.

We’ve gotten quite a bit of feedback about the decision by leaders of the California Federation of Teachers and their community allies to withdraw the “millionaires tax” ballot initiative. The CFT did so after striking a compromise March 14 with Governor Jerry Brown.

There is no question that the deal made major improvements to Brown’s initial proposal and catapulted the CFT and its partners into a major role in California politics, a good thing for the labor movement and the rest of working class California. Within the labor movement, the fight over the millionaires tax undoubtedly tilted politics in a more progressive direction, too.

Despite all this, there are still compelling reasons why proponents of the millionaires tax should have rebuffed the governor and pushed the tax ahead to the November election. The decision to pull back is a setback in the struggle to reverse the endless austerity provoked by the 2008 financial meltdown.

As Good as It Gets?

Many observers of California politics argue that the CFT and its allies pulled off a major coup. They stuck to their guns when the governor pressed for a deal in November. And by plowing forward with their own ballot measure, they injected the wildly popular idea of a millionaires tax into the debate over how to plug California’s budget deficit, and they also extracted important concessions from Brown.

The compromise initiative will bring in more money for the state than either the original Brown proposal or the CFT’s millionaires tax. (See a side-by-side comparison of how the original proposals stacked up.)

The compromise boosts the tax rate even more for individuals earning over $250,000, and the new measure cuts the regressive feature—a half percent sales tax—down to a quarter percent. Under the compromise, 85 percent of new revenue will come from tax hikes on top earners, with only 15 percent from the sales tax.

The deal is even more striking given that the CFT was actively opposed, or left twisting in the wind, by labor’s much larger players in California state politics. The Service Employees state council and the California Teachers Association carried Brown’s water to battle the CFT and its allies. 

In November appointees from SEIU International pushed through a statewide binding endorsement of Brown’s original ballot initiative, tying the hands of public sector locals that wanted to back the millionaires tax. And in February they stepped up their attacks. SEIU state director Dave Kieffer called Brown the “adult in the room” when it came to finding revenue solutions, dismissing out of hand any attempt to address tax questions outside of the narrow confines of acceptable Sacramento politics.

Millionaires tax supporters hoped to at least get an endorsement from the California Teachers Association (the National Education Association state body), especially after CTA’s largest local affiliate, United Teachers Los Angeles, backed the tax. But in the weeks leading up to the compromise, the CTA began telling its members the millionaires tax was fatally flawed, taking a similarly hard line in the press.

The CFT, a smaller California Educators Union, was also getting pressure from above, with American Federation of Teachers President Randi Weingarten reportedly pushing for a compromise in order to avoid a showdown with the state’s Democratic establishment. At the same time, Democratic legislators were threatening to punish the CFT when budgets are crafted later this year, targeting the CFT’s base in schools and universities for even more budgetary blood letting. 

Missing the Moment

Leaving the CFT and its allies scrambling to evaluate whether to forge ahead with their fight mostly alone. Besides the brass-knuckles opposition from Democratic lawmakers and their allies inside SEIU and CTA, other unions stood by with their fingers in the wind. While several endorsed the millionaires tax, most notably the Nurses (CNA) and the Longshore workers in Northern California (ILWU), none put real money behind it. Reports vary, but millionaires tax supporters appear to have collected a third of the required signatures to qualify for the ballot, and it’s unclear whether they had the financial or logistical resources to secure the required signature numbers by the end of April without additional commitments. 

Many supporters of the millionaires tax hoped the Occupy movement would boost their organizing, but Occupiers didn’t muster the interest or discipline necessary to mount the tightly coordinated, unglamorous work of signature gathering. Their real potential would have been truly effective during this campaign season, turning glitter bombs, mic checks, and all manner of creative disruption loose on the state’s millionaires, in the same way that California nurses hounded Arnold Schwarzenegger and Meg Whitman during past election campaigns.

If there was no real possibility that the millionaires tax was going to make it onto the ballot, then by compromising the CFT made the most out of a bad situation.

But if CFT and its allies had secured sufficient resources to get the millionaires tax in front of voters in November, here are six reasons why they should have rebuffed the governor and stuck with it—even though they would have faced a fierce onslaught from corporate opponents (read millionares).

Bait and switch. One worrisome aspect of the deal with Brown is that he continues to gather signatures for his original ballot initiative, ostensibly as a fallback in case the compromise measure fails to qualify. With only six weeks to gather close to 1 million signatures, that’s a real risk. This raises the equally real possibility that the governor has induced millionaire tax supporters to withdraw their measure without enough time to get the compromise on the ballot, thereby clearing the field for Brown’s original proposal, which relies more on a regressive sales tax. 

99 to 1. With just two words, the “millionaires tax” captured what’s wrong with our upside-down economy, and who should foot the bill to set things right side up. The millionaires tax wasn’t a stop-gap aimed at plugging the current budget hole—a limitation of both Brown’s measure and the compromise, which sunsets after seven years. It was a permanent turn towards a more working class affordable type of tax structure. Victory could have closed the door on the knee-jerk anti-tax politics that have defined California for a generation. The new measure misses the mark at defining a new common sense for the state middle class.

Money isn’t everything. The resource question haunted the millionaires tax campaign from day one. How much money could the CFT and their allies get from the rest of the labor movement? How much would business interests and billionaires pour into a campaign to defeat it? Money has become the shorthand for evaluating success in politics, and it’s a trap.

With tight timelines and high ballot qualification thresholds, resources are necessary to hire signature gatherers and mount a field campaign. But unions will never be able to match corporate pocketbooks, and it’s time we stopped listening to the army of consultants, political strategists, and ad makers telling us that money is the only tool we have at our disposal. The millionaires tax could have been bulletproof at the ballot box if its supporters had been willing to get out there and fight for it.

John Kerry learned this lesson too late, after he declined to back a 2004 ballot initiative to raise the Florida minimum wage. The measure won big—unlike Kerry—sweeping every county in Florida despite being outspent more than 4 to 1.

Break the insiders’ grip. Outside consultants and in-house lobbyists are focused on the access that comes with playing the politicians’ game. When you break ranks and run your own program, there’s always blowback. Legislators threatened to punish CFT members during the budget process, and turned a cold shoulder on their lobbyists and policy specialists in the corridors of the statehouse.

But this payback for independence and initiative was a small price compared with the promise of winning, which could have broken the grip that insiders have on labor’s political strategy. As the complicated wrangling with Governor Brown demonstrates, too often unions are taking our cues about what to do, and what’s even possible, from Democratic Party operatives. Politicians may tell you this is the last straw, but they always come back. In fact, you can count the fact that they’ll always cut a deal. We can’t afford to be so predictable. 

Lay our cards on the table. One of the paradoxes of politics is that everyone praises transparency, but laying your cards on the table makes it impossible to bluff. That’s a problem for politicians, but it shouldn’t be for unions. The analogy with strike preparation is instructive. The union hand is strongest when everyone has debated the issues, knows the decision points, and has a clear picture of what are and aren’t strike-worthy issues.

Compare this scenario to the common practice in today’s labor movement, where only a handful of officers and insiders know how big decisions are made and most rank-and-file members are in the dark. This breeds confusion and cynicism, but more importantly, it reinforces the idea that members are just pieces on a chessboard. Who is willing to take risks in this kind of environment? If you’re going to ask members to make sacrifices, you can’t be surprised when those who’ve stepped up want a say over what to do when faced with hard choices. The millionaires tax campaign could have been a turning point for the state’s labor movement, offering a concrete opportunity to model a different, more democratic way of doing politics. Missing that chance cost us more than dollars and cents.

Be willing to lose. It’s a necessary risk, if we’re fighting for something worth winning. And it’s the only way to pull the Democratic Party in a different direction, a move most unions consider a pre-condition for reversing today’s austerity. The Tea Party learned that lesson almost instinctively, and it’s why the Republican presidential candidates trip over themselves to lay claim to the conservative mantle.

If we blink every time there’s a showdown, then politicians like Jerry Brown will always count on that reflex. This dynamic will consistently drag politics rightward. We also know from the civil rights movement and labor’s 1930s upsurge that most great successes were not achieved on the first outing. A string of losses usually preceded a big breakthrough. If we’re not willing to live with a loss, then we’re never going to have the breakthrough.

Paving the way for an uncluttered ballot in November, a California teachers union struck a deal Wednesday with Governor Jerry Brown that would combine a millionaires tax with a sales tax boost.

The state’s labor movement had divided over the best way to put the need for public investment before the voters. The California Federation of Teachers (CFT) and other unions had pressed for a stiff tax on millionaires and were gathering signatures to qualify it for the ballot. 

But with backing from the Service Employees (SEIU) and the California Teachers Association (CTA), Brown put forward a competing ballot initiative he touted as “shared sacrifice.” Crafted to minimize opposition from business, the Brown measure would have hiked the sales tax and raised income taxes by 1 to 2 percent on earners over $250,000.

The state sales tax in California, at 7.25 percent, is already the highest in the nation.

The compromise announced Wednesday would cut the proposed sales tax increase in half, to 0.25 percent, while lifting the rates for top earners higher than Brown had proposed.

The income tax boost would last seven years, not the five years Brown had first put forward.

“The petition drive to get the millionaires tax on the ballot did have a real impact,” said Mike Parker, a retired union activist who had pushed for the tax with the Richmond Progressive Alliance. “It forced Brown to make a significant shift towards taxing the wealthy.”

The original millionaires tax initiative would have permanently raised rates by 3 percent for income over $1 million and by 5 percent for income over $2 million, garnering close to $16 billion the first two years.

The version agreed to this week would raise about $7 to $9 billion annually at first, state Democrats said, before tailing off to about $5 to $7 billion a year.

The money will head to the state’s general fund, disappointing education activists who noted that the millionaires tax initiative had set aside money for schools. The state faces a $9 billion overall budget gap.

“The governor’s proposal will cut further from education,” said Caitlin Fox-Hodess, a head steward in UAW Local 2865 at the University of California Berkeley. “The purpose of the millionaires tax was to have a separate fund for education and essential services.”

Playing the Inside Game

Jim Miller, who teaches at San Diego City College and is political action vice president of the CFT local on campus, said the union’s leadership caved to the governor and the unions opposed to the millionaires tax.

“They folded like a cheap tent,” Miller said. “By including the sales tax, it leaves the door wide open to anti-tax types who will say the unions are coming to pick your pocket. It throws away the incredible rhetoric of the 99% versus the 1%, it blurs the issue of progressive taxation, and centrally, it’s still temporary.”

Both the CTA and SEIU campaigned against the millionaires tax.

Miller said CFT switched its position without consulting members, infuriating activists like him who have spent months working with members and allied community groups to gather thousands of signatures.

“The process was deeply undemocratic,” Miller said. “This was the worst sort of inside-game, top-down unionism.”

Sources in the CFT said the union had planned to take the issue before its executive council this weekend but found its hand forced.

CFT spokesman Fred Glass said the union always made clear that it needed another partner from labor to commit resources to effectively fight the resistance expected to the millionaires tax, but couldn't find one. The California Nurses and Northern California division of the Longshore union (ILWU) had endorsed the tax.

"We were able to push a sitting governor to make a regressive tax much more progressive, and put a lot more responsibility on the shoulders of those who should bear it," Glass said, adding sixth-sevenths of the revenue raised by the compromise initiative will come from higher taxes on high earners.

Fox-Hodess said other unions and community groups in the millionaires tax coalition have not given up on the idea and will decide this week whether to pursue the initiative. The task will be much harder without the teachers union, the biggest and best-resourced partner in the group.

Some backers of the millionaires tax say it wasn’t clear their coalition was going to have enough signatures, which could have influenced CFT’s decision.

But the millionaires tax had the advantage of grassroots momentum, said Michael-David Sasson, a steward in Teamsters Local 2010 who works at the University of California Berkeley. The signature-gathering activated many groups not typically involved in politics, he added.

Sasson said the millionaires tax upset Democratic leaders, however, who likely threatened to exact their revenge by opposing CFT’s legislative agenda.

Longtime observers believe that both CTA and SEIU expected their support for the governor’s tax initiative to translate into more favorable treatment for their members when the ax falls in future rounds of budget-cutting.

“One can imagine there were threats as well as enticements in the discussion,” Sasson said.

Fast-approaching deadlines fed the need to find a compromise. Backers of the consolidated measure will have only six weeks to find 800,000 signatures to qualify it for the November ballot.

California has been hit hard by the economic crisis, but anti-tax legislators have blocked most proposals to raise revenue, and shortfalls have disproportionately translated into cuts. The state budget has fallen from $102 billion to $87 billion in the last four years. Support for the elderly and disabled has been slashed, libraries and parks have been closed, and tuition at California’s public universities and colleges jumped 21 percent last year alone, the highest increase in the nation.

Popularity Contest

Late February polls by the CFT showed support for the millionaires tax at 69 percent and backing for the Brown proposal at 56 percent. A third tax initiative had 40 percent support.

Separate polling by the Public Policy Institute of California showed the Brown proposal at 52 percent, down from nearly two-thirds several weeks ago.

Taxes on millionaires are gaining in popularity nationwide. Oregon voters passed a tax on the state’s wealthiest 3 percent two years ago, and in the wake of the Occupy movement, New York's governor extended special levies on high earners, backing away from his earlier opposition to such taxes.

Despite the public enthusiasm for the millionaires tax, several of California’s biggest unions had lined up behind the governor.

In January the 295,000-member CTA announced its support. Despite the poll numbers, CTA argued that Brown’s measure had the best chance at the ballot box. The California Business Roundtable and the Chamber of Commerce, among other large corporate interests, opposed the millionaires tax.

A similar tension existed inside SEIU, which has 700,000 members in California. The SEIU state council voted to back the Brown proposal in November, over the objections of several large public employee locals that wanted to throw the union’s considerable resources behind the millionaires tax.

But after a call for per-capita-weighted voting, the endorsement tilted in favor of Brown. The council voted to bind locals to the state council’s endorsement, barring dissenting locals from endorsing or funding the millionaires tax.

Sources familiar with the endorsement confirm it was driven by officials originally appointed by the SEIU International to run its giant statewide health care union, UHW, after the local was trusteed in 2009.

Us Vs. Them

Rank-and-file activists expressed frustration with the insider approach, especially after the openings created by Occupy and related movements to challenge politics as usual.

“A lot of other unions think about electoral politics as the whole game,” Fox-Hodess said. “It’s just one component of a larger struggle.”

Amanda Armstrong, a head steward in UAW Local 2865, said focusing on millionaires could have reversed the anti-tax mood that for three decades has provoked a steady decline in funding for everything except prisons.

Inspired by the Occupy movement, she and 50 Bay Area students and faculty marched 99 miles to converge on the Capitol in Sacramento March 5.

Joining thousands of teachers and students—from kindergarten to college—their demonstration was fueled by nearly $5 billion in state education cuts that will be triggered if voters don’t approve a tax increase in November.

Hundreds attempted to occupy the Capitol, provoking a standoff with state police that led to 68 arrests. “We’re not going to win this fight by going up to Sacramento to lobby,” Armstrong said.

At his daughter’s school, Sasson had secured the Parent Teacher Association’s endorsement of the millionaires tax. He had planned to table for signatures Friday night and wonders what he should tell the parents now.

“We had the crazy idea that people who are millionaires should be taxed at a higher rate indefinitely, and that moving to Mississippi levels of education funding is not a good thing,” he said. “It was a hyper-reasonable way to engage people who think bake sales will solve the school’s funding problems.”