Cutting taxes the right way

Pub date August 29, 2006
SectionEditorialSectionNews & Opinion

EDITORIAL Finally the Democratic Party in California is starting to talk seriously about tax policy. It’s an important change in the political winds, and if state treasurer Phil Angelides can get beyond the tepid-to-hostile press and use his promise of a middle-class tax cut to gain ground on Gov. Arnold Schwarzenegger, it may signal the end of decades of regressive and deeply harmful economic policy.
Schwarzenegger, who knows he’s in a tough race, has been trying to smear Angelides by saying that the Democratic candidate is pushing for tax hikes. Yes, he is — tax hikes on the likes of Arnold Schwarzenegger (and Phil Angelides), people with incomes of more than $500,000 a year. For the record, these are people who have seen their taxes drop dramatically under the Bush administration and are the direct beneficiaries of an alarming national trend of wealth concentration among the richest Americans.
Angelides isn’t talking about radical tax hikes; all he wants to do is restore the top state income tax rate to the level it was under Republican governors like Ronald Reagan and Pete Wilson. Still, raising taxes never plays well in the polls, so Angelides is now doing what he needed to do from the start of his campaign: he’s proposing to cut taxes on middle-class working families.
It’s a risky strategy: pundits on the right will accuse him of “class warfare,” and the details of his plans will get obscured by negative political ads and lousy media coverage. But it’s the right approach: he’s actually talking about shifting the tax burden upward, about changing the national trend in tax policy, about giving the majority of the voters tax breaks and paying for it by making a few wealthy people pay more.
But if it’s going to work, he needs to be a lot clearer on exactly how the dollars pencil out — and he needs to offer more than what seems like a relatively modest tax cut. Right now, his plan calls for $788 million in tax reductions for families earning less than $100,000 a year and $5 billion in tax hikes for the wealthy. He’s also offering to find $1 billion in state waste.
For a family living on $46,000 a year, the program would amount to $660 a year in tax relief.
We understand that the tax cuts have to be lower than the tax hikes — the state is deeply in debt, and there are all sorts of badly needed social programs that ought to be funded. But in the end, his plan sounds pretty mild: there’s a lot more than $1 billion in waste, corporate tax loopholes, and uncollected revenue out there, and a California family earning $46,000 a year, facing the insane housing market and rapidly rising energy costs, could use a lot more than $50 a month in extra cash.
Let’s remember: the transfer of wealth from the middle class to the rich (and especially the very rich) that’s taken place in the past two decades is unprecedented in the postwar era and quite possibly unprecedented in American history. A few bucks here and there aren’t really going to make that much difference. If Angelides is serious, he should revise his plan to at least double the tax cuts for the middle class, hike the tax credits for low-income families — and pay for it by creating another tax bracket altogether, for Californians who earn more than $1 million a year.
But this is an excellent start — and Angelides deserves tremendous credit for opening a discussion that should have taken place years ago. SFBG