Tax Breaks

The price of civilization: high taxes to support a high level of government services

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Jeffrey D. Sachs
Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

NEW YORK – We live in an era in which the most important forces affecting every economy are global, not local. What happens “abroad” – in China, India, and elsewhere – powerfully affects even an economy as large as the United States. 

Economic globalization has, of course, produced some large benefits for the world, including the rapid spread of advanced technologies such as the Internet and mobile telephony. It has also reduced poverty sharply in many emerging economies – indeed, for this reason alone, the world economy needs to remain open and interconnected.

Yet globalization has also created major problems that need to be addressed. First, it has increased the scope for tax evasion, owing to a rapid proliferation of tax havens around the world. Multinational companies have many more opportunities than before to dodge their fair and efficient share of taxation.

Moreover, globalization has created losers as well as winners. In high-income countries, notably the US, Europe, and Japan, the biggest losers are workers who lack the education to compete effectively with low-paid workers in developing countries. Hardest hit are workers in rich countries who lack a college education. Such workers have lost jobs by the millions. Those who have kept their jobs have seen their wages stagnate or decline.

Globalization has also fueled contagion. The 2008 financial crisis started on Wall Street, but quickly spread to the entire world, pointing to the need for global cooperation on banking and finance. Climate change, infectious diseases, terrorism, and other ills that can easily cross borders demand a similar global response. 

What globalization requires, therefore, are smart government policies. Governments should promote high-quality education, to ensure that young people are prepared to face global competition. They should raise productivity by building modern infrastructure and promoting science and technology. And governments should cooperate globally to regulate those parts of the economy – notably finance and the environment – in which problems in one country can spill over to other parts of the world.

The need for highly effective government in the era of globalization is the key message of my new book, The Price of Civilization. Simply put, we need more government nowadays, not less. Yet the role of government also needs to be modernized, in line with the specific challenges posed by an interconnected world economy.

I wrote The Price of Civilization out of the conviction that the US government has failed to understand and respond to the challenges of globalization ever since it began to impact America’s economy in the 1970’s. Rather than respond to globalization with more government spending on education, infrastructure, and technology, Ronald Reagan won the presidency in 1980 by pledging to slash government spending and cut taxes.

For 30 years, the US has been going in the wrong direction, cutting the role of government in the domestic economy rather than promoting the investments needed to modernize the economy and workforce. The rich have benefited in the short run, by getting massive tax breaks. The poor have suffered from job losses and cuts in government services. Economic inequality has reached a high not seen since the Great Depression.

These adverse trends have been exacerbated by domestic politics. The rich have used their wealth to strengthen their grip on power. They pay for the expensive campaigns of presidents and congressmen, so presidents and congressmen help the rich – often at the expense of the rest of society.  The same syndrome – in which the rich have gained control of the political system (or strengthened their control of it) – now afflicts many other countries.

Yet there are some important signs around the world that people are fed up with governments that cater to the rich while ignoring everyone else. Start with the growing calls for greater social justice. The upheavals in Tunis and Cairo were first called the Arab Spring, because they seemed to be contained to the Arab world. But then we saw protests in Tel Aviv, Santiago, London, and now even in the US. These protests have called first and foremost for more inclusive politics, rather than the corrupt politics of oligarchy.

Moreover, US President Barack Obama is gradually shifting toward the left. After three years in which his administration coddled corporate lobbyists, he has finally begun to emphasize the need for the rich to pay more taxes. This has come late in his term, and he might well continue to favor the rich and Wall Street in exchange for campaign contributions in 2012, but there is a glimmer of hope that Obama will defend a fairer budget policy.

Several European governments, including Spain, Denmark, and Greece, also seem to be moving in the same direction. Spain recently imposed a new wealth tax on high-net-worth taxpayers. Denmark elected a center-left government committed to higher government spending financed by new taxes on the rich. And Greece has just voted for a new property tax to help close its yawning fiscal deficit.

The European Commission has also called for a new Financial Transactions Tax (FTT) to raise around $75 billion per year. The Commission has finally agreed that Europe’s financial sector has been under-taxed. The new FTT might still face political opposition in Europe, especially in the United Kingdom, with its large and influential banking sector, but at least the principle of greater tax fairness is high on the European agenda.

The world’s most successful economies today are not in Asia, but in Scandinavia. By using high taxes to finance a high level of government services, these countries have balanced high prosperity with social justice and environmental sustainability. This is the key to well-being in today’s globalized economy. Perhaps more parts of the world – and especially the world’s young people – are beginning to recognize this new reality.


Jeffrey D. Sachs is Professor of Economics and Director of the Earth Institute at Columbia University. He is also Special Adviser to United Nations Secretary-General on the Millennium Development Goals.

Copyright: Project Syndicate, 2011.
www.project-syndicate.org

Guardian forum: Everybody loves public power

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The Guardian candidates’ forum was a blast — standing room only at the LGBT Center, a great, lively crowd, and most of the candidates for mayor showed up. Not Ed Lee, though — we invited him, but he was a no-show. That’s typical — he’s skipped the vast majority of the mayoral debates and events, and when he does show up, he leaves early.

We set out to pin the candidates down on five key issues that came out of the Guardian’s summer issues forums. Shaw San Liu, our moderator, forced the mayoral contenders to give us yes-or-no answers, and our all-star celebrity panel of answer analyzers (Sue Hestor, Corey Cook and Fernando Marti) weighed in and raised signs to tell us whether the candidate had said Yes, No, or Waffled.

The questions:

1. Will you support the creation of a municipal bank to offer access to credit to small business instead of relying on tax breaks for economic development?

 2. Will you support a freeze on condo conversions and the development of new market-rate condos until the city has a plan and the financing in place to meet the General Plan goal of 60 percent of all new units available at below market rate — and then index new market-rate housing to the creation of affordable units?

3. Do you have a viable plan to bring $250,000 a year in new revenue into the city to address the structural budget deficit?

4. Will you agree to opt out of the federal secure communities program and will you reverse Mayor Newsom’s policy and direct all local law-enforcement agencies not to cooperate with immigration authorities?

 5. Will you support a proposal to either buy out PG&E’s San Francisco facilities or build a new city grid through a bond act so that San Francisco will control its own energy distibution system?

Only John Avalos answered Yes to all five. But it was remarkable how many of the candidates supported most or all of the progressive agenda we’ve developed. Every single candidate voiced support for a municipal bank. And every one of them said Yes to buying out PG&E’s distribution system so the city could run it’s own electric utility.

They had a lot more trouble with the notion of a freeze on new market-rate housing and condo conversions, and not all of them could explain how they would bring in $250,000 in new revenue. But I give them all credit for showing up and facing the tough questions and saying that, for the most part, they wanted to promote a progressive agenda.

Here are the scores:

John Avalos: Y, Y, Y, Y, Y

David Chiu: Y, W, Y, Y, Y

Bevan Dufty: Y, N, Y, Y,Y

Dennis Herrera: Y, W, Y, Y, Y

Phil Ting: NA. NA, Y, Y, Y (He came late and missed the first two)

Joanna Rees: Y, N, N, Y, Y

Leland Yee: Y, W, W, Y, Y

Jeff Adachi: Y, W, Y, Y, Y

Terry Baum: Y, Y, N, Y, Y

So five waffles on housing policy; nobody wants to stand up and say that we’re building too much housing for the rich and that it has to stop until we catch up with affordable housing. (At least Dufty was honest and told us he doesn’t want to cut off TIC and condo conversions).

I’m waiting for the video and I’ll post it when I get it.

The Chron’s bizarre tax logic

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Chronicle Washington columnist Carolyn Lochhead doesn’t typically show her political beliefs in such a clear and direct way, but her attack on the Obama tax plan is just … bizarre. Check it out:

Rather than pursue long-run tax and entitlement reform, the new Obama plan, his sixth by some counts, litters up the tax code even more and does nothing significant on debt drivers Medicare and Medicaid.

Actually, the big “debt drivers” over the past two decades haven’t been Medicare and Medicaid, or even social security — the debt and deficit problem comes from (1) tax cuts on the rich and (2) wars. Remember, Bill Clinton left office with a budget surplus (even including entitlements, and even including projections for the baby boomers retiring and all the other panic buttons the GOP likes to push). Bush turned that into a staggering deficit by cutting taxes at the same time he went to war in Iraq and Afghanistan.

And “litter up the tax code?” That’s crazy talk. Obama wants to get rid of tax breaks that litter up the code.

More:

He re-iterated his call to end the Bush tax cuts on high earners, but keeps the rest of the Bush tax cuts which are a bushel of special tax breaks for the middle class.

What? The middle class has been slammed by the recession (and by 20 years of income moving almost entirely to the top 5% of the population). The only way out of this recession is to give the middle class more spending power.

I’m not defending everything Obama’s done (his willingness to extend the Bush tax cuts was part of the problem), but seriously: This is economics 101.

 

 

A new progressive agenda

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Over the past three months, the Guardian has been hosting a series of forums on progressive issues for the mayor’s race. We’ve brought together a broad base of people from different communities and issue-based organizations all over town in an effort to draft a platform that would include a comprehensive progressive agenda for the next mayor. All told, more than 100 people participated.

It was, as far as we know, the first time anyone tried to do this — to come up with a mayoral platform not with a few people in a room but with a series of open forums designed for community participation.

The platform we’ve drafted isn’t perfect, and there are no doubt things that are left out. But our goal was to create a document that the voters could use to determine which candidates really deserve the progressive vote.

That’s a critical question, since nearly all of the top contenders are using the word “progressive” on a regular basis. They’re fighting for votes from the neighborhoods, the activists, the independent-minded people who share a vision for San Francisco that isn’t driven by big-business interests.

But those of us on what is broadly defined as the city’s left are looking for more than lip service and catchy phrases. We want to hear specifics; we want to know that the next mayor is serious about changing the direction of city policy.

The groups who endorsed this effort and helped plan the forums that led to this platform were the Harvey Milk LGBT Club, SEIU Local 1021, the San Francisco Tenants Union, the Human Services Network, the Community Congress 2010, the Council of Community Housing Organizations, San Francisco Rising, Jobs with Justice, and the Center for Political Education.

The panelists who led the discussions were: Shaw-san Liu, Calvin Welch, Fernando Marti, Gabriel Haaland, Brenda Barros, Debbi Lerman, Jenny Friedenbach, Sarah Shortt, Ted Gullicksen, Nick Pagoulatos, Sue Hestor, Sherilyn Adams, Angela Chan, David Campos, Mario Yedidia, Pecolio Mangio, Antonio Diaz, Alicia Garza, Aaron Peskin, Saul Bloom, and Tim Redmond.

We held five events looking at five broad policy areas — economy and jobs; land use, housing and tenants; budget and social services; immigration, education and youth; and environment, energy and climate change. Panelists and audience participants offered great ideas and the debates were lively.

The results are below — an outline of what the progressives in San Francisco want to see from their next mayor.

 

 

ECONOMY AND JOBS

Background: In the first decade of this century, San Francisco lost some 51,000 jobs, overwhelmingly in the private sector. When Gavin Newsom was sworn in as mayor in January 2004, unemployment was at 6.4 percent; when he left, in January 2011, it was at 9.5 percent — a 63 percent increase.

Clearly, part of the problem was the collapse of the national economy. But the failed Newsom Model only made things worse. His approach was based on the mistaken notion that if the city provided direct subsidies to private developers, new workers would flock to San Francisco. In fact, the fastest-growing sector of the local economy is the public sector, especially education and health care. Five of the 10 largest employers in San Francisco are public agencies.

Local economic development policy, which has been characterized by the destruction of the blue-collar sector in light industry and maritime uses (ironically, overwhelmingly privately owned) to free up land for new industries in business services and high tech sectors that have never actually appeared — or have been devastated by quickly repeating boom and bust cycle.

Instead of concentrating on our existing workforce and its incredible human capital, recent San Francisco mayors have sought to attract a new workforce.

The Mayor’s Office has, as a matter of policy, been destroying blue-collar jobs to promote residential development for people who work outside of the city.

There’s a huge disconnect between what many people earn and what they need. The minimum wage in San Francisco is $9.92, when the actual cost of living is closer to $20. Wage theft is far too common.

There is a lack of leadership, oversight and accountability in a number of city departments. For example, there is no officiating body or commission overseeing the work of the Office of Economic and Workforce Development. Similarly the Arts Commission, the chartered entity for overseeing cultural affairs, is responsible for less than 25 percent of the budget reserved for this purpose

There’s no accountability in the city to protect the most vulnerable people.

The city’s main business tax is highly regressive — it’s a flat tax on payroll but has so many exceptions and loopholes that only 8,500 businesses actually pay it, and many of the largest and richest outfits pay no city tax at all.

 

Agenda items:

1. Reform the Mayor’s Office of Economic and Workforce Development to create a department with workforce development as a primary objective. Work with the San Francisco Unified School District, City College and San Francisco State to create sustainable paths to training and employment.

2. Create a municipal bank that offers credit for locally developed small businesses instead of relying on tax breaks. As a first step, mandate that all city short-term funds and payroll accounts go only to banks or credit unions that will agree to devote a reasonable percentage of their local loan portfolios for small business loans.

3. Reform procurement to prioritize local ownership.

4. Link economic development of healthcare facilities to the economic development of surrounding communities.

5. Link overall approval of projects to a larger economic development policy that takes as its centerpiece the employment of current San Francisco residents.

6. Enforce city labor laws and fund the agency that enforces the laws.

7. Establish the Board of Supervisors as the policy board of a re-organized Redevelopment Agency and create community-based project area oversight committees.

8. Dramatically expand Muni in the southeast portion of the city and reconfigure routes to link neighborhoods without having to go through downtown. Put special emphasis on direct Muni routes to City College and San Francisco State.

9. Reform the payroll tax so all businesses share the burden and the largest pay their fair share.

10. Consolidate the city’s various arts entities into a single Department of Arts & Culture that includes as part of its mandate a clear directive to achieve maximum economic development through leveraging the city’s existing cultural assets and creative strengths and re-imagining San Francisco’s competitive position as a regional, national and international hub of creative thinking. Sponsor and promote signature arts programs and opportunities to attract and retain visitors who will generate maximum economic activity in the local economy; restore San Francisco’s community-based cultural economy by re-enacting the successful Neighborhood Arts Program; and leverage the current 1-2 percent for art fees on various on-site building projects to be directed towards non-construction-site arts activity.

 

 

LAND USE, HOUSING AND TENANTS

Background: Since the office market tanked, the big land-use issue has become market-rate housing. San Francisco is building housing for people who don’t live here — in significant part, for either very wealthy people who want a short-term pied a terre in the city or for commuters who work in Silicon Valley. The city’s own General Plan calls for 60 percent of all new housing to be below-market-rate — but the vast majority of the new housing that’s been constructed or is in the planning pipeline is high-end condos.

There’s no connection between the housing needs of city residents and the local workforce and the type of housing that’s being constructed. Family housing is in short supply and rental housing is being destroyed faster than it’s being built — a total of 21,000 rental units have been lost to condos and tenancies in common.

Public housing is getting demolished and rebuilt with 2500 fewer units. “Hotelization” is growing as housing units become transitory housing.

Planning has become an appendage of the Mayor’s Office of Economic Development, which has no commission, no public hearings and no community oversight.

Projects are getting approved with no connection to schools, transit or affordable housing.

There’s no monitoring of Ellis Act evictions.

Transit-oriented development is a big scam that doesn’t include equity or the needs of people who live in the areas slated for more development. Cities have incentives to create dense housing with no affordability. Communities of concern are right in the path of this “smart growth” — and there are no protections for the people who live there now.

Agenda items:

1. Re emphasize that the Planning Department is the lead land-use approval agency and that the Mayor’s Office of Economic and Workforce Development should not be used to short-circuit public participation in the process.

2. Enact a freeze on condo conversions and a freeze on the demolition of existing affordable rental housing.

3. Ban evictions if the use or occupation of the property will be for less than 30 days.

4. Index market-rate to affordable housing; slow down one when the other is too far ahead.

5. Disclose what level of permanent affordability is offered at each project.

6. Stabilize existing communities with community benefits agreements before new development is approved.

 

 

BUDGET AND SOCIAL SERVICES

Background: There have been profound cuts in the social safety net in San Francisco over the past decade. One third of the city’s shelter beds have been lost; six homeless centers have closed. Homeless mental health and substance abuse services have lost $32 million, and the health system has lost $33 million.

None of the budget proposals coming from the Mayor’s Office have even begun to address restoring the past cuts.

There’s not enough access to primary care for people in Healthy San Francisco.

Nonprofit contracts with the city are flat-funded, so there’s no room for increases in the cost of doing business.

The mayor has all the staff and the supervisors don’t have enough. The supervisors have the ability to add back budget items — but the mayor can then make unilateral cuts.

The wealthy in San Francisco have done very well under the Bush tax cuts and more than 14 billionaires live in this city. The gap between the rich and the poor, which is destroying the national economy, exists in San Francisco, too. But while city officials are taking a national lead on issues like the environment and civil rights, there is virtually no discussion at the policy level of using city policy to bring in revenue from those who can afford it and to equalize the wealth disparities right here in town.

Agenda items:

1. Establish as policy that San Francisco will step in where the state and federal government have left people behind — and that local taxation policy should reflect progressive values.

2. Make budget set-asides a budget floor rather than a percentage of the budget.

3. Examine what top city executives are paid.

4. Promote public power, public broadband and public cable as a way to bring the city millions of dollars.

5. Support progressive taxes that will bring in at least $250 million a year in permanent new revenue.

6. Change the City Charter to eliminate unilateral mid-year cuts by the mayor.

8. Pass a Charter amendment that: (a) Requires the development of a comprehensive long-term plan that sets the policies and strategies to guide the implementation of health and human services for San Francisco’s vulnerable residents over the next 10 years, and (b) creates a planning body with the responsibility and authority to develop the plan, monitor and evaluate its implementation, coordinate between policy makers and departments, and ensure that annual budgets are consistent with the plan.

9. Collect existing money better.

10. Enact a foreclosure transfer tax.

 

 

YOUTH, IMMIGRATION, AND EDUCATION

Background: In the past 10 years, San Francisco has lost 24,000 people ages 12-24. Among current youth, 5,800 live in poverty; 6,000 have no high school degree; 7,000 are not working or attending school; 1,200 are on adult probation.

A full 50 percent of public school students are not qualified for college studies. Too often, the outcome is dictated by race; school-to-prison is far too common.

Trust between immigrants and the police is a low point, particularly since former Mayor Gavin Newsom gutted the sanctuary ordinance in 2008 after anti-immigrant stories in the San Francisco Chronicle.

Some 70 percent of students depend on Muni, but the price of a youth pass just went from $10 to $21.

Agenda items:

1. Recognize that there’s a separate role for probation and immigration, and keep local law enforcement from joining or working with immigration enforcement.

2. Improve public transportation for education and prioritize free Muni for youth.

3. Create family-friendly affordable housing.

4. Restore the recreation direction for the Recreation and Parks Department.

5. Implement police training to treat youth with respect.

6. Don’t cut off benefits for youth who commit crimes.

7. Shift state re-alignment money from jails to education.

 

ENERGY, ENVIRONMENT AND CLIMATE CHANGE

Background: When it comes to land use, the laws on the books are pretty good. The General Plan is a good document. But those laws aren’t enforced. Big projects get changed by the project sponsor after they’re approved.

Land use is really about who will live here and who will vote. But on a policy level, it’s clear that the city doesn’t value the people who currently live here.

Climate change is going to affect San Francisco — people who live near toxic materials are at risk in floods and earthquakes.

San Francisco has a separate but unequal transportation system. Muni is designed to get people downtown, not around town — despite the fact that job growth isn’t happening downtown.

San Francisco has a deepwater port and could be the Silicon Valley of green shipping.

San Francisco has a remarkable opportunity to promote renewable energy, but that will never happen unless the city owns the distribution system.

 

Agenda items:

1. Promote the rebirth of heavy industry by turning the port into a center for green-shipping retrofits.

2. Public land should be for public benefit, and agencies that own or control that land should work with community-based planning efforts.

3. Planning should be for the community, not developers.

4. Energy efficiency programs should be targeted to disadvantaged communities.

5. Pay attention to the urban food revolution, encourage resident owned farmers markets. Use unused public land for local food and community gardens.

6. Provide complete information on what parts of the city are fill, and stop allowing development in areas that are going to be inundated with sea level rise.

7. Prioritize local distributed generation of electricity and public ownership of the power grid.

8. Change Clean Energy San Francisco from a purchasing pool system to a generating system.

How to create jobs

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I listened to the Obama speech, and at least he showed some energy (although this bipartisan shit clearly doesn’t work and I don’t know when he’s going to give it up). But here’s what makes me crazy: The whole point of this $447 billion stimulus is to create jobs. Why not just, you know, create jobs?

I agree that a cut in the payroll tax (which, for a lot of working Americans, amounts to more money than the income tax) will put money in the pockets of people who are likely to spend it, and will stimulate, to some extent, consumer demand. That, of course, is the crux of the issue — unless there’s demand for goods and services, the economy’s not going to turn around.

Of course, some of that money will go to replenish savings and pay down debt — not a bad thing, but not what we need right now.

Cutting the payroll tax for businesses will also be a direct stimulus, particularly for smaller employers, who create most of the new jobs. But again, let’s be real: I just ran the numbers, and a company the size of the Guardian would get enough of a tax break to hire one part-time person at not much more than the city’s minimum wage. Sure, you spread that across millions of small businesses, and you’ll get some new job creation. But I wonder: Is this the most efficent way to achieve the objective?

Let’s see. An economist at Moody’s says the plan could create 1.9 million jobs. That, of course, includes not just the jobs created by the tax cuts, but the multiplier effect (you hire someone to dig a ditch, that person buys shoes so the shoestore needs more help, etc.) And the prediction is just that — a prediction. It assumes, for example, that most of the employers who get the tax break will use the extra money to hire more people. I’m not so sure about that. Businesses tend to hire not because they have spare cash (which might just as well end up in the owner’s pocket) but because they need more workers to meet growing demand for goods and services. If that demand isn’t there, the jobs won’t magically appear just because employers have more cash on hand. (In fact, some of the biggest employers in this country have plenty of cash on hand; they aren’t using it to hire anyone.)

How about we try it another way? Let’s assume that $50,000 a year is a decent wage in most parts of the country. (You want to make it $60,000? Whatever. It just changes the calculus a little bit).

For $1 million, you can hire 20 people at $50K. For $1billion, you can hire 20,000 people. For $400 billion, you can hire 800,000 people.

Why not just do that? Why not take that stimulus money and hire public employees — to teach in schools, to build roads and bridges, to repair the nation’s electricity infrastructure, to construct high-speed rail lines, to rebuild crumbling housing in inner cities …. there’s plenty to do.

Yeah, some of the money would go to the dreaded “bureacrats” who would oversee the hiring programs and fill out the forms. But the world needs accountants and managers, too — and the ranks of the unemployed include quite a few people with those skills.

Now: There’s lots of debate about the size of the multiplier; when it comes to job creations, I’ve heard numbers from 1.4 to 5.0, depending on the circumstances. But there’s no doubt that direct federal hiring — 800,000 new living-wage jobs — would have a direct impact on consumer demand and create a guaranteed need for more private-sector workers. I’d bet it’s about one for one — the 800,000 federal jobs would lead to another 800,000 private-sector jobs. That’s 1.6 million jobs — and unlike the current plan, those are jobs that are not dependent on what employers decide to do with their tax breaks.

Hell, we want to cut unemployment in half? For, say, $1.5 trillion, you could create 7 million jobs pretty easily. That’s just about the annual cost of the wars in Iraq and Afghanistan.

The government knows how to create jobs. Federal, state and local agencies hire people every day. The whole thing seems so silly; why give money to private employers and hope for the best when you can use the same money to hire people directly? Why waste time and money on the middleman?

 

 

The real Leland Yee

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tredmond@sfbg.com

It’s early January 2011, and the Four Seas restaurant at Grant and Clay is packed. Everyone who is anyone in Chinatown is there — and for good reason. In a few days, the Board of Supervisors is expected to appoint the city’s first Asian mayor.

The rally is billed as a statement of support for Ed Lee, the mild-mannered bureaucrat and reluctant mayoral hopeful. But that’s not the entire — or even, perhaps, the central — agenda.

Rose Pak, who describes herself as a consultant to the Chinese Chamber of Commerce but who is more widely known as a Chinatown powerbroker, is the host of the event. She stands in front of the room, takes the microphone, and, in Cantonese, delivers a remarkable political speech.

According to people in the audience, she says, in essence, that the community has come out to celebrate and support Ed Lee — but that’s just the start. She also urges them not just to promote their candidate — but to do everything possible to prevent Leland Yee from becoming mayor.

She continues on for several minutes, lambasting Yee, the state Senator who lived in Chinatown as a child, accusing him of about every possible political sin — and turning the Lee rally into an anti-Yee crusade. And nobody in the crowd seems terribly surprised.

Across Chinatown, from the liberal nonprofits to the conservative Chamber of Commerce, there’s a palpable fear and distrust of the man who for years has been among San Francisco’s most prominent Asian politicians — and who, had Lee not changed his mind and decided to run for a full term this fall, was the odds-on favorite to become the city’s first elected Chinese mayor.

The reasons for that fear are complex and say a lot about the changing politics of Asian San Francisco, the power structure of a city where an old political machine is making a bold bid to recover its lucrative clout — and about the career of Yee himself.

Senator Leland Yee is a political puzzle. He’s a Chinese immigrant who has built a political base almost entirely outside of the traditional Chinatown community. He’s a politician who once represented a deeply conservative district, opposed tenant protections, voted against transgender health benefits and sided with Pacific Gas and Electric Co. on key environmental issues — and now has the support of some of the most progressive organizations in the city. He’s taken large sums of campaign money from some of the worst polluters in California, but gets high marks from the Sierra Club.

His roots are as a fiscal conservative — yet he’s been the only Democrat in Sacramento to reject budget compromises on the grounds that they required too many spending cuts.

He’s grown, changed, and developed his positions over time. Or he’s become an expert at political pandering, telling every group exactly what it wants to hear. He’s the best chance progressives have of keeping the corrupt old political machine out of City Hall — or he’s a chameleon who will be a nightmare for progressive San Francisco.

Or maybe he’s a little bit of all of that.

 

Leland Yin Yee was born in Taishan, a city in China’s Guangdong province on the South China Sea. The year was 1948; Mao Zedong’s Communist Party of China had taken control of much of the countryside and was moving rapidly to take the major cities. The nationalist army of General Chiang Kai-Shek was falling apart, and Yee’s father, who owned a store, decided it was time for the family to leave.

The Yees made it to Hong Kong, and since Mee G. Yee had previously lived in the United States and served in the U.S. Army during World War II, he was ultimately able to move the family to San Francisco. In 1951, the three-year-old Leland Yee arrived in Chinatown.

For four years, Yee lived with his sister and mother in a one-room apartment with a shared bathroom while his father worked as a sailor in the merchant marine. It was, Yee recalled in a recent interview, a tight, closed, and largely self-sufficient community.

“The movie theater, the shoe store, the barber shop, food — everything you needed you could get in Chinatown,” Yee said. “You never had to leave.”

Of course, after a while, Yee and his mom started to venture out, down Stockton Street to Market, where they’d shop at the Emporium, the venerable department store. “It was like walking into a different country,” he said. “If you didn’t know English, they didn’t have time for you.”

Yee, like a lot of young Chinese immigrants of his era, put much of his time into his studies — in the San Francisco public schools and in a local Chinese school. “My mom spoke a village dialect, and we had to learn Cantonese,” he said. “Every little kid had to go to Chinese school. We hated it.”

When Yee was eight, his parents managed to buy a four-unit building on Dolores Street, and the family moved to the Mission, where he would spend not only the rest of his childhood but much of his early adult life. He graduated from Mission High School, enrolled in City College, studied psychology and after two years won admission to UC Berkeley.

Berkeley in 1968 was a very different world from Chinatown and even the relatively controlled environment he’d experienced at home in the Mission. “You didn’t protest in school. You’d have been sent home, and your mother would kill you,” he said.

At Berekely, all hell was breaking loose, with the antiwar protests, the People’s Park demonstrations, the campaign to create a Third World College (which led to the first Ethnic Studies Department), and a general attitude of mistrust for authority. “I developed a sense of activism,” Yee said. “I realized I could speak out.”

That spirit quickly vanished when Yee lost faith in some of his fellow activists. “People would work with us, then get into positions of power and use that against you,” he recalled. “A lot of my friends said ‘forget it.’ I left the scene.”

Yee once again devoted his energy to school, earning a masters at San Francisco State University and a Ph.D in child psychology from the University of Hawaii. Along the way, he met his wife, Maxine.

With his new degree, the Yees moved back to San Francisco — and back in with his parents at the Dolores property, where he, Maxine and a family that would grow to four kids would live for more than a decade.

 

Yee worked as a child psychologist for the San Francisco Department of Public Health, starting the city’s first high school mental-health clinic. He went on to become a child psychologist at the Oakland Unified School District, then joined a nonprofit mental health program in San Jose.

In 1986, Yee decided to get active in politics for the first time since college, and ran for the San Francisco School Board. He lost — and that would be the only election he would ever lose. In 1988, he won a seat, and established himself as an advocate for students of color, fighting school closures in minority neighborhoods. He also tried to get the district to modify its harsh disciplinary rules, arguing against mandatory expulsions.

On fiscal issues, though, Yee was a conservative. For his first term, despite the brutal cutbacks of the recession of the late 1980s and early 1990s, he insisted that the district make do with the money it had. His solution to the red ink: Cut waste. Only in 1992, when he was up for re-election, did he acknowledge that the district needed more cash; at that point, he supported a statewide initiative to tax the rich to bring money to the schools.

The sense of fiscal conservatism — of holding the line on taxes, but mandating open and fair contracting procedures and tight financial controls — was a hallmark of much of his political career. When the Guardian endorsed him for re-election to the board in 1992, we wrote that “there’s real value in his continuing vigilance against administrative fat and favoritism in contracts.”

Over the next four years, Yee worked with then-Superintendent Waldemar “Bill” Rojas, a deeply polarizing figure who pushed his own personal theory of “reconstitution” — firing all the staff at low-performing schools — and later was enmeshed in a scandal that led to prison time for a contractor he’d hired. Yee told me he was the only board member to vote against hiring Rojas, but people who were watching the board closely back then say he didn’t always stand up to the superintendent.

He also became what some say was a bit too close with Tim Tronson, a consultant hired by the district as a $1,000-a-day facilities consultant. Tronson wound up getting indicted on 22 counts of grand theft, embezzlement, and conspiracy in a scheme to steal $850,000 from the schools, and was sentenced to four years in state prison.

In 1998, when some school board members wanted to build housing for teachers on property that the district owned in the Sunset, Yee led the opposition — with Tronson’s help. At one meeting at Sunset Elementary School, Yee went so far as to say, according to people present, that “Tim Tronson is my man, and I rely on him for advice.”

Yee acknowledged that he worked closely with Tronson to defeat that housing project. “He was the facilities manager,” Yee explained, “and I said that I trusted his judgment.”

 

Yee has either a great sense of political timing or exceptional luck. He ran for the Board of Supervisors in 1996, facing one of the weakest fields in modern San Francisco history. He was the only Chinese candidate and one of just two Asians (the other, appointed incumbent Michael Yaki, barely squeaked to re-election). In an at at-large election with the top five winning seats, Yee came in third, with 103,000 votes.

He was never a progressive supervisor. In 2000, the Guardian ranked the good votes of what we referred to as Willie Brown’s Board, and Yee scored only 43 percent. He was against campaign finance reform. He supported the brutal gentrification and community displacement represented by the Bryant Square development. He voted to kill a public-power feasibility study and opposed the Municipal Utility District initiative. He opposed a moratorium on uncontrolled live-work development.

In 2002, Yee was one of only three supervisors to oppose Proposition D, a crucial public-power measure that would have broken up PG&E’s monopoly in the city. He stood with PG&E (and then-Sups. Tony Hall and Gavin Newsom) in opposition to the measure, then signed a pro-PG&E ballot argument packed with PG&E lies.

When I asked him about that stand, Yee at first didn’t recall opposing Prop. D, but then said he “stood with labor” on the issue. In fact, the progressive unions didn’t oppose Prop. D at all; the opposition was led by PG&E’s house union, IBEW Local 1245.

Yee was particularly bad on tenant issues. He not only voted to deny city funding for the Eviction Defense Collaborative, which helped low-income tenants fight evictions; he actually tried to get the city to put up money for a free legal fund to help landlords evict their tenants. He opposed a ballot measure limiting condo conversions. He opposed a measure to limit the ability of landlords to pass improvement costs on to their tenants.

In 2001, Yee voted to uphold a Willie Brown veto of legislation to limit tenancies in common, a backdoor way to get around the city’s condo conversion ordinance. Only Hall and Newsom, then the most conservative supervisors on the board, joined Yee. At one point, he started asking whether the city should consider repealing rent control.

He opposed an affordable housing bond in 2002, joining the big landlord groups in arguing that it would raise property taxes. Every tenant group in town supported the measure, Proposition B; every landlord group opposed it.

I asked Yee about his tenant record, and he told me that he now supports rent control. But he said that he was always on the side of homeowners and small landlords, and that property ownership was central to Chinese culture. “I was responding to the Chinese community and the West Side,” he said.

He wasn’t much of an environmentalist, either — at least not in today’s terms. He was one of the only city officials to support a “Critical Car” rally in 1999, aimed at promoting the rights of vehicle drivers (and by implication, criticizing Critical Mass and the bicycle movement).

His record on LGBT issues was mixed. While he supported a counseling program for queer youth when he was on the school board, he also supported JROTC, angering queer leaders who didn’t want a program in the public schools run by, and used as a recruiting tool for, the military, which at that point open discriminated against gay and lesbian people.

 

 

Yee was also one of only two supervisors who voted in 2001 against extending city health benefits to transgender employees.

That was a dramatic moment in local politics. Nine votes were needed to pass the measure, and while eight of the supervisors were in favor, Yee and Hall balked. At one point, Board President Tom Ammiano had to direct the Sheriff’s Office to go roust Sup. Gerardo Sandoval, who was ducking the issue in his office, to provide the crucial ninth vote.

Yee didn’t just vote against the bill. According to one reliable source who was there at the time, Yee spoke to a community meeting out on Ulloa Street in the Sunset and berated his colleagues, quipping that the city should have better things to do than “spend taxpayer money on sex-change operations.”

It was a bit shocking to trans people — Yee had, over the years, befriended some of the most marginalized members of what was already a marginalized community. “There was one person at the rail crying, saying ‘Leland, how could you do this to us,'” Ammiano recalled.

The LGBT community was furious with Yee. “I didn’t speak to him for at least a year,” Gabriel Haaland, one of the city’s most prominent transgender activists, told me.

Yee now says the vote was a mistake — but at the time, he told me, he was under immense pressure. When he voted for the queer youth program, he said, “the elders of the Chinese community ripped me apart. They called my mother’s friends back in the village [where he was born] and said her son was embarrassing the Chinese community.”

That must have been difficult — and he said that “if I had known the pain I had caused, I wouldn’t have voted that way.” But it was hard to miss that pain his vote caused.

On the other hand, people learn from their experiences, attitudes evolve, we all grow up and get smarter, and the way Yee describes it, that’s what happened to him.

In 2006, when he was running for state Senate, Yee met with a group of trans leaders and formally — many now say sincerely — apologized. It was an important gesture that made a lot of his critics feel better about him.

“He didn’t have to do that,” Haaland said. “People change, and he paid for his crime, and that’s genuine enough for me.”

As a former school board member, Yee kept an interest in the schools — but not always a healthy one. At one point, he actually proposed splitting SFUSD into two districts, one on the (poorer) east side of town and one on the (richer) west. “We strongly opposed that,” recalled Margaret Brodkin, who at the time ran Coleman Advocates for Children and Youth. “Eventually he dropped the idea.”

For all the problems, in his time on the Board of Supervisors, Yee developed a reputation for independence from the Brown Machine, which utterly dominated much of city politics in the late 1990s. His weak 43 percent rating on the Guardian scorecard was actually third-best among the supervisors, after Ammiano and the late Sue Bierman.

In 1998, he was one of the leaders in a battle to prevent the owners of Sutro Tower from defying the city’s zoning administrator and placing hundreds of new antennas on Sutro Tower. He, Bierman, and Ammiano were the only supervisors opposing Brown’s crackdown on homeless people in Union Square.

When he ran in the first district elections, in 2000, against two opponents who had Brown’s support and big downtown money, the Guardian endorsed him, noting that while he “can’t be counted on to support worthy legislation … He’s one of only two board members who regularly buck the mayor on the big issues.”

(He never liked district elections, and used to take any opportunity to denounce the system, at times forcing Ammiano to use his position as president to tell Yee to quit dissing the electoral process and get to the point of his speech.)

 

In 2002, the westside state Assembly district seat opened up, and both Yee and his former school board colleague Dan Kelly ran in the Democratic primary. Yee won, and went on to win the general election with only token opposition.

His legislative record in the Assembly wasn’t terribly distinguished. Yee never chaired a policy committee — although he did win a leadership post as speaker pro tem. And he cast some surprisingly bad votes.

In 2003, for example, then-Assemblymember Mark Leno introduced a bill that would have exempted single-room occupancy hotels from the Ellis Act, which allows landlords to evict tenants for no reason. Yee refused to vote for the bill. Leno was furious — he was one vote short of a majority and Yee’s position would have doomed the bill. At the last minute, a conservative Republican who had grown up in an SRO hotel voted in favor.

When he ran for re-election in 2004, we noted: “What’s Leland Yee doing up in Sacramento? We can’t figure it out — and neither, as far as we can tell, can his colleagues or constituents. He’s introduced almost no significant bills — compared, for example, to Assemblymember Mark Leno’s record, Yee’s is an embarrassment. The only high-profile thing he’s done in the past several years is introduce a bill to urge state and local governments to allow feng shui principles in building codes.”

In 2006, Yee decided to move up to the state Senate, and he won handily, beating a weak opponent (San Mateo County Supervisor and former San Francisco cop Mike Nevin) by almost 2-1. His productivity increased significantly in the upper chamber — and in some ways, he moved to the left. He’s begun to support taxes — particularly, an oil severance tax — and when I’ve questioned him, he somewhat grudgingly admits that Prop. 13 deserves review.

He’s done some awful stuff, like trying to sell off the Cow Palace land to private developers. But he has consistently been one of the best voices in the Legislature on open government, and that’s brought him some national attention.

Yee has been a harsh critic of spending practices and secrecy at the University of California, and when UC Stanislaus refused in 2010 to release the documents that would show how much the school was paying Sarah Palin to speak at a fundraiser, Leland flew into action. He not only blasted the university and introduced legislation to force university foundations to abide by sunshine laws; he worked with two Stanislaus students who had found the contract in a dumpster and made headlines all over the country.

He’s fought for student free speech rights and this year pushed a bill mandating that corporations that get tax breaks for job creation prove that they’ve actually created jobs — or pay the tax money back. He’s also won immense plaudits from youth advocates and criminal justice reformers for his bill that would end life-without-parole sentences for offenders under 18.

Along the way, he compiled a 100 percent voting record from the major labor unions, including the California Nurses Association and SEIU, and with the Sierra Club. All three organizations have endorsed him for mayor.

Yee told me that he thinks he’s become more progressive over the years. “My philosophy has shifted,” he said.

Yet when you talk to his colleagues in Sacramento, including Democrats, they aren’t always happy with him. Yee has a tendency to be a bit of a loner — he’s never chaired a policy committee and in some of the most bitter budget fights, he’s refused to go along with the Democratic majority. Yee insists that he’s taken principled stands, declining to vote for budget bills that include deep service cuts. But the reality in Sacramento is that budget bills have until this year required a two-thirds vote, meaning two or three Republicans have had to accept the deal — and losing a Democratic vote has its cost.

“You have to give up all sorts of things, make terrible compromises, to get even two Republicans,” one legislative insider told me. “When a Democrat goes south, you have to find another Republican, and give up even more.”

In other words: It’s easy to take a principled stand, and make a lot of liberal constituencies happy, when you aren’t really trying to make the state budget work.

 

I met Rose Pak on a July afternoon at the Chinatown Hilton. She brought along her own loose tea, in a paper package; the waitress, who clearly knew the drill, took it back to the kitchen to brew. Pak and I have not been on the greatest of terms; she’s called the Guardian all kinds of names, and I’ve had my share of critical things to say about her. But on this day, she was polite and even at times charming.

After we got the niceties out of the way (she told me I was unfair to her, and I told her I didn’t like the way she and Willie Brown played politics), we started talking about Yee. And Pak (unlike some people I interviewed for this story) was happy to speak on the record.

She told me Yee had “no moral character.” She told me she couldn’t trust him. She told me a lot of stories and made a lot of allegations that we both knew neither she nor I could ever prove.

Then we got to talking about the politics of Chinatown and Asians in San Francisco, and a lot of the animosity toward Yee became more clear.

For decades, Chinatown and the institutions and people who live and work there have been the political center of the Chinese community. Nonprofits like the Chinatown Community Development Center have trained several generations of community organizers and leaders. The Chinese Chamber of Commerce, the Six Companies, and other business groups have represented the interests of Chinese merchants. And while the various players don’t always get along, there’s a sense of shared political culture.

“In Chinatown,” Gordon Chin, CCDC’s director, likes to say, “it’s all about personal connections.”

There’s a lively infrastructure of community-service programs, some of which get city money. There’s also a sense that any mayor or supervisor who wants to work with the Chinese community needs to at least touch base with the Chinatown establishment.

Yee doesn’t do that. “He doesn’t give a shit about them,” David Looman, a political consultant who has worked with many Chinese candidates over the years, told me.

Yee’s Asian political base is outside of Chinatown; he told me he sees himself representing more of the Chinese population of the Sunset and Richmond and the growing Asian community in Visitacion Valley and Bayview.

Pak is connected closely to Brown, who Yee often clashed with. For Pak, Brown, and their allies, strong connections to City Hall mean lucrative lobbying deals and public attention to the needs of Chinatown businesses. Then there’s the nonprofit sector.

CCDC and other nonprofits do important, sometimes crucial work, building and maintaining affordable housing, taking care of seniors, fighting for workers rights, and protecting the community safety net. Yee, Pak said, “has never shown any interest in our local nonprofits. We all work together here, and he doesn’t seem to care what we do.” Yee told me he has no desire to see funding cut for any critical social services in any part of town. But he has also made no secret of the fact that he questions the current model of delivering city services through a large network of nonprofits, some of which get millions of taxpayer dollars. And the way Pak sees it, all of that — the nonprofits, the business benefits, the contracts — are all at risk. “If Leland Yee is elected mayor,” she told me, “we are all dead.”

I ran into an old San Francisco political figure the other day, a man who has been around since the 1970s, inside and outside of City Hall, who remains an astute observer of the players and the power relationships in the local scene. At the time we talked, he wasn’t supporting any of the mayoral candidates, but he had a thought for me. “This town,” he said, “is being taken over by a syndicate. Willie Brown is the CEO, and Rose Pak is the COO, and it’s all about money and influence.”

That’s not a pleasant thought — I’ve lived through the era of political machine dominance in this town, and it was awful. In the days when Brown ran San Francisco, politics was a tightly controlled operation; only a small number of people managed to get elected to office without the support of the machine. Developers made land-use policy; gentrification and displacement were rampant; corruption at City Hall turned a lot of San Franciscans off, not only to the political process but to the whole notion that government could be a positive force in society.

A few years ago, I thought those days were over — and to a certain extent, district elections will always make machine politics more difficult. But when I see signs of the syndicate popping up — and I see a candidate like Ed Lee, who’s close friends with Brown, leading the Mayor’s Race — it makes me nervous. And for all his obvious flaws, at least Leland Yee isn’t part of that particular operation. If there’s a better reason to vote for him, I don’t know what it is.

YEE HOME PURCHASE RAISES SUSPICIONS

Rose Pak has a question about Leland Yee. “How,” she asked me, “did the guy manage to buy a million-dollar house on a $30,000 City Hall salary?”

Pak isn’t the only one asking — numerous media reports over the years have examined how Yee raised a family of four and bought a house in the Sunset on very little visible income. And while I’m not usually that interested in the personal finances of political candidates, I decided that it was worth a look.

Here’s what I found: Public records show that in July 1999, Yee and his wife, Maxine, purchased a house on 24th Avenue for $875,000 (it’s now assessed at slightly more than $1 million). At the time, Yee was a San Francisco supervisor, earning a little more than $30,000 a year. (The salary of the supervisors was raised dramatically shortly after Yee left the board and went to the state Assembly.) His wife wasn’t working. And his economic interest statements for that period show no other outside earnings. So the disposable, after-tax income of the entire Yee family couldn’t have been much more than $25,000.

That, by any normal standard, shouldn’t have been enough to float a mortgage that, records show, totaled $516,000. In fact, the interest payments alone on that mortgage alone would total $3,600 a month — more than Yee’s gross income.

Documents in the Assessor’s Office show another paper trail, too. In 1989, Jung H. Lee, Yee’s mother, transferred the deed on a four-unit Dolores St. building where the family had been living to Maxine and Leland Yee — for no money. And a few months before the Yees bought the Sunset house, they took out a $320,000 home-equity loan on that property. That was the down payment on the Sunset property.

Still: At that point, the Yees would have been paying off two mortgages, with a total nut of about $5,000 a month — and supporting four kids, in San Francisco. In 2002, Yee’s economic interest statement’s show some modest income from teaching at Lincoln University — but nowhere near enough to pay that level of expenses.

What happened? Yee explains it this way: “For more than 10 years, we were living rent-free in my parents’ property,” he told me I an interview. “We were a close Chinese family, and my parents provided the food and helped pay for the children’s clothing. So we had almost no expenses and we lived very frugally.”

During that period, Yee was working for the San Francisco Department of Public Health, the Oakland Unified School District, and a San Jose nonprofit, earning, he said, between $50,000 and $90,000 a year. If he saved almost all of that money, he would have had more than a half-million dollars in the bank when he bought the Sunset house.

There’s nothing on any of his economic disclosure forms showing any ownership of stocks or other reportable financial interests during that period, so he wasn’t investing the money. In fact, he says, it was, and is, all in simple savings accounts. A bit unusual for that large a sum of money.

How did he get a mortgage? “Back then,” he said, “banks were willing to lend a lot more freely than they do today.”

Starting in 2003, Yee was in the state Assembly, making a higher salary — but still not much in excess of $100,000 a year. After taxes, he was probably taking home about $75,000 — and $60,000 was going to the two mortgages.

How did he do it? “We have been supplementing our income with our savings,” he said. “We don’t take vacations, we are very careful with our money.” And they clearly aren’t desperate for cash — Yee’s daughter occupies two of the four units in the Dolores St. building they own, but the other two units are vacant.

It’s possible. It’s plausible. But I don’t blame people for wondering how he managed to pull it off. (Tim Redmond, with research assistance by Oona Robertson) 

 

 

 

BIG CORPORATIONS HAVE BACKED YEE

Yee became a prodigious fundraiser in Sacramento — and a lot of the money came from big corporations that had business in the Legislature. And while he has perfect scores from the Sierra Club and the big labor unions, he’s taken tens of thousands of dollars from some of the biggest corporations, agribusiness interests, and polluters in the state. And at times, he’s voted their way.

Since 1993, for example, campaign finance records show Yee has taken more than $20,000 from Chevron, ExxonMobil, Valero, Conoco Phillips, and BP. He’s received another $22,450 from the chemical industry (and industry employees). Most of it came from Clorox, Dow Chemical, and Dupont.

And while the Sierra Club may not have considered it a priority, Sen. Mark Leno has worked hard to pass a bill limiting chemical fire retardants in furniture. In 2008, Yee voted against Leno’s AB 706.

That year he also refused to support a bill that would prohibit the use of the chemical diacetyl in workplaces. The industries that opposed AB 514 (including Bayer, Abbott Laboratories, Pfizer, and Johnson & Johnson) have given Yee a total of more than $60,000.

In 2003, Yee voted against a crucial tenant bill, one that would have prevented the owners of single room occupancy hotels from using the Ellis Act to evict tenants. He received a campaign check for $2,500 from the San Francisco Apartment Association the next day. Landlords in general have given Yee close to $40,000.

Then there’s agribusiness. Yee gets a lot of money from the farming industry, despite the fact that there obviously aren’t many farms in his district. Why, for example, would the California Poultry Association, the California Cattlemen’s Association, and the California Farm Bureau give him money? The Poultry Association’s Bill Mattos told us that Yee “has taken a keen interest in California’s poultry industry.”

Yee also took immense flak from the San Francisco Chronicle and other papers over a 2003 vote against a bill to limit emissions from farm vehicles. In an editorial, the paper wrote that he was “doing dirty work for the lobbyists.” In the end, under immense public pressure, he switched positions and voted for the bill. I asked Yee about all that money from all those bad operators, and he told me — as most politicians will — that campaign cash has never influenced any of his votes.

So why do all these groups give him money? “It’s about whether you will sit down and listen,” Yee said. “I will talk to all sides and at least consider the arguments as a thoughtful human being. Then I vote my conscience.” (Tim Redmond, with research by Oona Robertson) 

A cheap shot at Tom Ammiano

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Elizabeth Lesly Stevens has done some good work on the insanity of Prop. 13. Check out this, and this, and this — all of which say, more or less, that rich people are getting a great deal under the tax law, and aren’t paying their share.


Correct. Well said. Good points.


So why did she decide to take a cheap shot at the one local politician who’s actually trying to do something about it?


A column that ran in the New York Times July 3 talks about Assemblymember Tom Ammiano, who is leading an effort to reform the worst parts of Prop. 13 — the loopholes that allow commercial property to avoid reassessment, costing the state and local government tens of millions of dollars or more a year.


And what does Stevens, who based on her past writing clearly agrees this is a problem, have to say? Well, she says Ammiano is courageous for taking on the issue — then tweaks him for having a low, Prop. 13-protected assessment on his own house in Bernal Heights:


Yet the feisty Mr. Ammiano is quiet as a church mouse about altering the residential protections of Proposition 13 — of which he is a signal beneficiary.


Mr. Ammiano, who is also a comedian, pays just $530 a year in taxes on the Bernal Heights home he has owned since 1974. As far as the city and Proposition 13 are concerned, his house is worth $45,600. Zillow estimates its current worth at $645,000. At that value, the tax would be about $7,500.


That’s all perfectly true. It’s also true that Ammiano is (a) not rich and (b) has spoken for years of the need to reform all of Prop. 13, not just the commercial loophole he’s going after right now. I’ve known Ammiano a long time — and I can tell you that, since the days he was on the San Francisco School Board in the 1990s, he has consistently favored amending Prop. 13, including the residential benefits that he now enjoys.


So he hasn’t been “quiet as a church mouse.” He’s been pretty loud, for a pretty long time.


He also knows, as does Stevens, that repealing Prop. 13 entirely is a political nonstarter. Not going to happen. Too bad, but even talking about it is a waste of time right now. So Ammiano’s going after the only reform he has a chance of winning — and, by the way, attacking the most outrageous loophole.


I don’t think Stevens meant this to be a hit piece or anything; she, and her editors, are just fascinated by this strange law we Californians call Prop. 13. But when I read her piece, what I got out of it was: Here’s a guy who wants to make other people pay more taxes — but he’s not going to do anything about his own tax breaks. I just don’t think that’s terribly true, or terribly fair.


(By the way, Stevens is on vacation with her family, and, as is her usual practice, didn’t want to comment. She just said people can make their points in the comments section of her piece.)

One Hundred Days of Spring: As Mid-Market talks, two organizers do

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All photos by Stephen Heraldo

Just beyond the scope of the perpetual debate of revitalizing Mid-Market — defined as the stretch from Fifth Street to Van Ness Avenue — an extraordinary project is quietly closing its doors on an oblique, no-man’s-land corner of Market near Franklin. There, for one hundred days and nights, an empty glass storefront opened up to spill a swath of light and music onto the cigarette-studded sidewalk — without funding, a business model, or (as founders Will Greene and Sam Haynor are the first to say) much of anything else.

“Ask us our mission statement,” One Hundred Days of Spring organizer Haynor challenges.

“We don’t have one,” Greene, his creative partner, cuts in.

“Well, yes we do,” says Haynor.

“Yeah, that not doing it seemed like a cop-out,” the pair concludes.

“It” was creating more than three months of free and donation-based events, classes, and recorded stories representing a variegated slice of the local population: hipster kids in art collectives, professionals on their Market Street commutes, and low income neighborhood residents, including many who bed down each night on the block.

As part of Central Market Partnership’s ongoing efforts to inject arts and culture into revitalization plans for mid-Market, the San Francisco Office of Economic and Workforce Development is joining with the Arts Commission to hold a series of focus groups exploring ways to engage artists, small businesses and cultural organizations in the making of a thriving creative district.

Five focus groups have already met, according to OEWD’s Jordan Klein, and over the coming weeks, more gatherings — of community residents, transportation advocates, historical preservation advocates, and nonprofit leaders — will provide insight for the Central Market Economic Strategy, to be released in the late summer or early fall.

One Hundred Days of Spring wasn’t on the agenda of any of these meetings. A former boutique clothing store sandwiched between SROs and auto body shops on a strip shadowed by the sheer, block-long face of a Honda dealership, the space’s previous tenants didn’t last long. But transformed into a gypsy-tent-circus-wagon-theater-gallery-cum-classroom, the storefront, reborn as the Schoolhouse, rooted itself in the neighborhood in just a few months.

The hundred days are now over. But if the packed closing ceremony was any indication, Haynor and Greene’s model is one that the community is keen to reproduce. Mark Singer, a research librarian and freelance writer who found the project in what the two founders call the “analog way” — by stumbling across the threshold — told supporters, “I challenge everyone in this room to replicate what we’ve seen here, seen in the last hundred days.”

“The ultimate goal,” Haynor said, “is not only to share and to educate, but at the end of one hundred days, to have created one hundred new ideas for people to carry out into the world.”

 

Nothing to it

One Hundred Days of Spring was an experiment in community-supported programming. Rather than relying on or waiting for grant money, Haynor and Greene hoped to show that a community space can be self-sustaining — for the benefit of those who can contribute more and those who must contribute less.

“San Francisco is grant rich,” Haynor explains, “but it’s also full of people waiting for grants. They have a bunch of awesome ideas, but by the time the grant cycle comes around, the initial spark is gone. For us, going after a grant would just eat up time, and we wouldn’t end up doing what we wanted.”

Instead, the two 25-year-olds pooled their savings and paid $2,000 a month for rent from March to June, $200 for utilities, plus a few hundred extra for renovations and insurance. Within three weeks of the initial idea, they had moved into the space and populated a calendar of events through friends, friends of friends, and tools like SF Chalkboard. They were running full tilt by day six. 

In just over three months, the team offered more than 250 classes, shows, and tutorials — sometimes five in a day — covering everything from truffle-making and fermentation to bike repairs, aerial silks, and open mics. By collecting donations on a pay-what-you-can basis, Haynor and Greene were able to recover a large portion of their initial output, and also garner an extra $4,000 to reinvest into the project.

Greene on the value of 100 days of events: “If you try to put a value on what we have now, that we didn’t have then, you couldn’t buy it for $4,000.”

Though the Schoolhouse founders ended up $4,000 short, Greene says they “could have broken even” if they had focused more on the project’s revenue-generating components, like filming videos for musicians who performed in the space.

Even so, for Greene the worth of One Hundred Days of Spring was indisputable. “If you try to put a value on what we have now, that we didn’t have then, you couldn’t buy it for $4,000,” he says.

When Judy Nemzoff, community arts and education program director for the Arts Commission, stopped by the Schoolhouse and asked how Haynor and Greene did what they did, the two replied, “Well, we just signed a lease.”

 

It takes two

Inside the Schoolhouse, the laid-back attitude seemed to likewise shrug “nothing to it but to do it.” But the warm, easy atmosphere belied the late nights and hard work it took to get ‘er done.

Understanding how One Hundred Days of Spring came to be — and why it worked so well — means understanding a bit about its creators

Greene and Haynor, hanging at the Schoolhouse

Haynor and Greene have the kind of friendship people make movies about. Besides the sort-of charming things like finishing each other’s sentences and bragging about accomplishments each knows the other would never mention for himself, there’s the sense that somehow, these two unassuming fellows are going to change the world.

“We’re a good balance,” Greene says. With the air of someone showing how two-plus-two equals four, he explains, “Sam’s a bit spastic, and I can plunge a toilet.”

“We have different skill sets, but we share goals,” he continues. “We keep each other in check. We’re both very often wrong, but we’re rarely both wrong at the same time.”

Coco Spencer, who joined One Hundred Days of Spring as an intern partway through and become an indispensible team member, says she was willing to dedicate so many hours to the Schoolhouse because, “Basically, Sam and Will are the most inspiring people I’ve ever met.”

Haynor and Greene were campers and later counselors together at the Bar 717 Ranch in Trinity County. There, they found each other, and also a passion for teaching — or, as they put it, “helping people to be good versions of themselves.”

Though each has traveled and embarked on sundry individual projects — Greene as a musician and videographer, Haynor as a chess champion and conflict-area journalist — they continue to connect over their drive to educate in unique new ways.

 

Bathroom, beats, and big ideas

At the Schoolhouse, that meant engaging community members through a service-based approach. “Our main goal is to provide resources to people who need resources,” Greene says. “We’re not interested in providing resources to people who have resources.”

Given the diversity of The Schoolhouse’s participants, “resources” could mean different things.

Haynor explains, “For some people, we’re a bathroom. For some we’re a place to stop in and say ‘hi.’ For some, we’re a place to do events.”

“We’re successful because we’re always doing something fun, and everyone feels invited,” Greene says. “It’s the loose nature of our project. There’s no doorman, no guy with a cash box.”

There were challenges (“Sam’s been trying to put together homeless poetry readings, but he’s scheduled them for the first of the month. That’s when everyone gets their checks, so everyone gets drunk,” Greene says at one point), but there were also many moments — like when a woman from the block walked up and started giving Haynor a massage, or when Greene calmly negotiated with a rowdy, intoxicated visitor, encouraging her to pipe down and eventually leave — that pointed to a deft interface with the surrounding community.

“They respect our storefront more than they do the others,” Greene says. Some locals worked shifts at the Schoolhouse in return for resources. Others stopped in for music, for food and nutrition classes, or to look at the art. Some simply came by to talk about living in the area.

During an “Un-Talent Show”, a performer named SofT humorously described a street-dweller’s perpetual problem: carrying belongings. He showed an in-stitches audience how to bundle objects in an old sweater — a wholly relatable rap on wrapping. Another visit came from Benny, one of SF’s famous itinerant tamale sellers, who lives in an SRO across the street and makes what partakers described as “possibly the world’s best tamales” across town in his girlfriend’s kitchen.

Haynor describes a woman who walked into a sewing workshop — run by SF Social Fabric, a volunteer-staffed bike maintenance and sewing skills collective — with “some trepidation.”

“She was in a room with a bunch of people who were nothing like her,” he says, “but we got to know each other over the fact that we all wear clothes. And they all fall apart.”

Neighborhood connections at the Schoolhouse

“There’s a duality to this corner,” Haynor says. “From doctors to the people who live on the block to all the people in the middle who travel Market Street. Before us, some wouldn’t even cross the street.”

“At our best,” he continues, “we’re a place people from another demographic can discover the old-fashioned way — with their eyes and their feet. They cross the threshold, ask what we’re doing, decide to stay, and learn something. Now, I can’t go five minutes without seeing someone I know, or someone who I recognize, or someone who just popped in.”

Singer, a perfect example of the phenomenon, started stopping by between two and five times a week after his initial discovery. He framed the project’s importance in simpler terms: “This is where we need these things to happen. Where it smells like urine on a hot day.”


Let’s put on a show!

Singer believes that projects like the Schoolhouse can “transform parts of San Francisco” by providing services that are more than “just artists and gallery-talk.” The Schoolhouse, he says, “was something visceral.”

“One Hundred Days of Spring created an infinite possibility for community that can’t be replicated on a screen or keyboard. We’re not talking Internet cafés with white earbuds, but humans breathing in the same space — collaborating, communicating in one room, and that room changing every darn day.”

Indeed, the walls of the Schoolhouse were repainted so many times over the course of the hundred days — with layers of murals, street art, installations, white space for projecting films — that Spencer, who took charge of many of the events’ logistics, joked she was hoping to reduce the interior square footage, and thus, the rent.

The zealous energy required to transform the space again and again was reminiscent — Singer pointed out — of Babes-in-Arms-era Mickey Rooney and Judy Garland exclaiming Hey, kids! Let’s put on a show in this old barn! That down-home, DIY energy may be just what efforts like the Mid-Market revitalization require.

Greene, who attended one of the Central Market Partnership’s focus groups, says the consensus was that knowledge about and access to space were the biggest obstacles to creating and executing programs of any kind.

“People are looking for answers,” he says, “looking for some larger entity to hand them space, or looking tax breaks. There’s the feeling that you can’t just do what you want to do.”

“Rather than saying ‘if you give us space, we’ll fill it with beautiful things,’ you can say ‘I’m just going to do it.’ If you’re willing to make it happen, if you work really hard, if you work with the people you’re trying to reach, then you don’t have to worry about anything else.”

Despite the waiting, wanting, hoping attitudes Greene says he encountered, he points out that plenty of others are “just doing it.” The Schoolhouse helped along a few such visionaries by sponsoring two “Grant Prix Dinners.” During the informal roundtables, entrepreneurs presented project ideas between courses. Participants paid a fee for dinner and a ballot on which to elect their favorite projects – to whom the entry frees were turned over as seed money at the end of the night. 

 

Bringing together the neighborhood

At times, especially in San Francisco and other urban areas where real estate is costly, amping up a neighborhood’s arts and cultural amenities has acted as a roundabout measure to invite the type of gentrification that sweeps streets clean. That kind of programming is not intended to serve current residents so much as to usher in new ones. 

By contrast, the Schoolhouse made a conscious decision to serve the neighborhood’s existing population — with safer-feeling streets resulting, and much more quickly, at that. 

One Hundred Days of Spring was a bold, direct move to engage the local community. As such, it was highly effective not only at providing needed resources, but at tempering the less-desirable qualities of the neighborhood by creating a sense of community and responsibility among residents and passers-through.

“Coming out of Muni, walking home on Market Street,” Singer had said, “can frankly be pretty scary. There’s substance abuse, drug deals, and people who may or may not be harmless.” The Schoolhouse, he said, helped diffuse that lack of ownership and feeling of “anything goes.” For Singer – and Schoolhouse denizens of all backgrounds — the space managed to help tie a few new knots. 

“The Schoolhouse brought me closer to a world that’s very marginal,” Singer said. “the homeless world.”

Whether or not Mid-Market planners will look to the Schoolhouse for a lesson in effective community building, the project’s two masterminds have undoubtedly developed a model they can draw on in the future.

Haynor and Greene plan to continue working together on community education projects. With One Hundred Days of Spring under their belts, they will be able to approach supporters “not just with an idea, but with a proven concept.”

“We are both in this together to see what we’re both capable of,” Haynor said. “To see if we’re any good at this thing.”

In the style of banter so typical of the pair, Greene added, “So we can figure out the rest of what we’re going to do with our whole darn lives.”

 

Ten good bills for 2011

2

The news in Sacramento is mostly bad — Jerry Brown still can’t find the Republicans he needs to pass a budget, although maybe the redistricting process will help him. But it’s not all bad. Some important bills passed their houses of origin in the past week, and with Democrats controlling both the Senate and the Assembly and a Democratic governor, there’s actually a chance they could become law.


At the top of my list is the measure by Darrel Steinberg that could allow counties and school districts to raise a wide range of taxes. It is, as Sen. Mark Leno notes, a “game changer.” And it only requires a simple majority of both houses. (I wonder: Could the San Francisco supervisors put a tax measure on the ballot in November on the assumption that the Steinberg bill will be in effect by then?) If the GOP won’t budge on the budget, the Dems need to at least give local government the chance to find the resources to keep essential services running.


Assemblymember Tom Ammiano got AB 9, also known as Seth’s Law, approved on the Assembly floor. The measure, named in memory of Seth Walsh, a 13-year-old gay student from Tehachipi who suffered years of harassment and abuse, gives school districts the tools (and the mandate) to address bullying.


The Assembly also approved Ammiano’s AB 889, the Domestic Workers Bill of Rights, which gives domestic workers the same basic labor-law protections as other California workers, and AB 1081, the TRUST Act, which would allow California counties to opt out of S-Comm, the awful federal law that seeks to force local cops to become ICE agents.


Over at the state Senate, Mark Leno won approval for 11 bills, including SB 914, which would mandate that police get a warrant before searching the data on a person’s cell phone. It’s crazy that SB 914 is even necessary, but the state Supreme Court has ruled that, while you need a warrant to search a personal computer, you don’t need one to search a cell phone. SB 790 makes it easier for local agencies to form Community Choice Aggregation systems. SB 819 would give the state more authority to take firearms away from people who have committed felonies or have been institutionalized for mental illness. (The NRA’s going to hate this bill — felons have the right to guns, too …) SB 233 — another one I really like — gives local government the right to impose vehicle license fees.


Sen. Leland Yee won overwhelming support for SB 8, which mandates that foundations affiliated with the University of California, Cal State or community college campuses abide by the same public records laws as the schools themselves. (The Sarah Palin speaking fees bill.) SB 364, which requires corporations that get tax breaks for job creation to prove they’ve actually created jobs. SB 9 — another one that ought to be a no-brainer — ends the practice of giving juvenile offenders sentences of life without parole.


Seems likely all of these will emerge from the remaining house — and then we’ll see whether Brown is willing to sign progressive legislation.


 

SFBG Radio: can anyone stop the oil companies?

2

Johnny thinks the oil industry is on its last legs, that everyone hates the oil companies right now, that Obama wants to get rid of their tax breaks — and that solar tech will soon render them little more than burned out hulks. Tim thinks the industry is still so powerful that nothing is going to change in Washington. Check out the Great Oil Debate after the break.

I HateOilCompanies by endorsements2010

Editor’s notes

6

tredmond@sfbg.com

The candidates for mayor of San Francisco are already lining up endorsements — the Sierra Club held its interviews April 23, which seems awfully early to me, since some of the most interesting contenders in this town (Tom Ammiano, Matt Gonzalez) have a tendency to jump in at the last minute. And the filing deadline isn’t until August.

But the sooner the big names and organizations are lined up and the money is locked in, the harder it will be for anyone to pull off an August surprise. So unless the redistricting commission seriously messes with Mark Leno’s state Senate seat or Ed Lee bows to the pressure from Willie Brown, Rose Pak, and their allies and decides to go back on his promise and seek a full term, we’re probably looking at a rough approximation of what the voters will face in November.

With John Avalos in the race, the ballot’s become a lot more attractive to progressives. It’s not as if the other major candidates don’t have a lot to offer, and in some cases, they have a lot to offer to the left. There are smart, experienced, qualified people running.

But let’s be honest here: David Chiu, Dennis Herrera, Phil Ting, Leland Yee, and Bevan Dufty all operate somewhere in the squishy political center, a place where tax breaks for corporations are okay, where “homeownership opportunities” tend to trump the needs of tenants, where deals with big private developers are sculpted around the edges but never rejected outright, and where cuts in services are a larger part of the budget solution than taxes on the rich.

Michela Alioto-Pier is off on the far right of the San Francisco political world, and if she looks at all credible and gets any significant traction (and that’s a big if) she’ll be downtown’s favorite candidate. But until now, there was nobody holding the solid progressive banner.

I don’t think that means Avalos’ appeal is limited to the left; he’s in a swing district, and he’s very popular there, and he can talk about small business and community development and open, honest government. He doesn’t sound like a crazy radical; he’s polite and respectful and listens to people.

But I’m glad we have a candidate who won’t try to argue that 25 percent affordable housing at Treasure Island is something to be proud of, or that the Twitter tax break will create jobs, or that social inequality can’t be addressed through local policy. I’m glad there’s someone who can push the discussion and debate out of the middle, can force some of the others who want progressive support to take strong stands, and can liven things up a bit. Because without him, all of the candidates were sounding a lot alike — and I really don’t want to be bored this fall.

The failed experiment

27

news@sfbg.com

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity — so much so that tax revenues will go up, despite lower rates.

The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman’s ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W. Bush in 2001 and 2003, which President Barack Obama has agreed to continue for two years.

You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because the Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

Tax policy is something the framers of the Constitution left to politics. And in politics, the facts often matter less then who has the biggest bullhorn.

The Mad Men who once ran campaigns featuring doctors extolling the health benefits of smoking are now busy marketing the dogma that tax cuts mean broad prosperity, no matter what the facts show.

As millions of Americans prepare to file their annual taxes, they do so in an environment of media-perpetuated tax myths. Here are a few points about taxes and the economy that you may not know, to consider as you prepare to file your taxes. (All figures are inflation adjusted.)

1. Poor Americans do pay taxes.

Gretchen Carlson, the Fox News host, said last year “47 percent of Americans don’t pay any taxes.” John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans.

Ari Fleischer, the former Bush White House spokesman, once said “50 percent of the country gets benefits without paying for them.”

Actually, they pay lots of taxes — just not lots of federal income taxes.

Data from the Tax Foundation shows that in 2008, the average income for the bottom half of taxpayers was $15,300.

This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

2. The wealthiest Americans don’t carry the burden.

This is one of those oft-used canards. Senator Rand Paul, the tea party favorite from Kentucky, told David Letterman recently that “the wealthy do pay most of the taxes in this country.”

The Internet is awash with statements that the top 1 percent pays, depending on the year, 38 percent or more than 40 percent of taxes.

It’s true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.

Social Security, Medicare, and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That’s because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.

3. In fact, the wealthy are paying less taxes.

The Internal Revenue Service issues an annual report on the 400 highest income-tax payers. In 1961, there were 398 taxpayers who made $1 million or more, so I compared their income tax burdens from that year to 2007.

Despite skyrocketing incomes, the federal tax burden on the richest 400 has been slashed, thanks for a variety of loopholes, allowable deductions and other tools. The actual share of their income paid in taxes, according to the IRS, is 16.6 percent. Adding payroll taxes barely nudges that number.

Compare that to the vast majority of Americans, whose share of their income going to federal taxes increased from 13.1 percent in 1961 to 22.5 percent in 2007.

(By the way, during seven of the eight Bush years, the IRS report on the top 400 taxpayers was labeled a state secret, a policy that the Obama overturned almost instantly after his inauguration.)

4. Many of the very richest pay no current income taxes at all.

John Paulson, the most successful hedge fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero.

Congress lets hedge fund managers earn all they can now and pay their taxes years from now.

In 2007, Congress debated whether hedge fund managers should pay the top tax rate that applies to wages, bonuses and other compensation for their labors, which is 35 percent. That tax rate starts at about $300,000 of taxable income; not even pocket change to Paulson, but almost 12 years of gross pay to the median-wage worker.

The Republicans and a key Democrat, Sen. Charles Schumer of New York, fought to keep the tax rate on hedge fund managers at 15 percent, arguing that the profits from hedge funds should be considered capital gains, not ordinary income, which got a lot of attention in the news.

What the news media missed is that hedge fund managers don’t even pay 15 percent. At least, not currently. So long as they leave their money, known as “carried interest,” in the hedge fund, their taxes are deferred. They only pay taxes when they cash out, which could be decades from now for younger managers. How do these hedge fund managers get money in the meantime? By borrowing against the carried interest, often at absurdly low rates — currently about 2 percent.

Lots of other people live tax-free, too. I have Donald Trump’s tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets “professional” real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.

Frank and Jamie McCourt, who own the Los Angeles Dodgers, have not paid any income taxes since at least 2004, their divorce case revealed. Yet they spent $45 million one year alone. How? They just borrowed against Dodger ticket revenue and other assets. To the IRS, they look like paupers.

In Wisconsin, Terrence Wall, who unsuccessfully sought the Republican nomination for U.S. Senate in 2010, paid no income taxes on as much as $14 million of recent income, his disclosure forms showed. Asked about his living tax-free while working people pay taxes, he had a simple response: everyone should pay less.

5. And (surprise!) since Reagan , only the wealthy have gained significant income.

The Heritage Foundation, the Cato Institute, and similar conservative marketing organizations tell us relentlessly that lower tax rates will make us all better off.

“When tax rates are reduced, the economy’s growth rate improves and living standards increase,” according to Daniel J. Mitchell, an economist at Heritage until he joined Cato. He says that supply-side economics is “the simple notion that lower tax rates will boost work, saving, investment, and entrepreneurship.”

When Reagan was elected president, the marginal tax rate for income was 70 percent. He cut it to 50 percent and then 28 percent starting in 1987. It was raised by George H.W. Bush and Clinton and then cut by George W. Bush. The top rate is now 35 percent.

Since 1980, when President Reagan won election promising prosperity through tax cuts, the average income of the vast majority — the bottom 90 percent of Americans — has increased a meager $303, or 1 percent. Put another way, for each dollar people in the vast majority made in 1980, in 2008 their income was up to $1.01.

Those at the top did better. The top 1 percent’s average income more than doubled to $1.1 million, according to an analysis of tax data by economists Thomas Piketty and Emmanuel Saez. The really rich, the top 10th of 1 percent, each enjoyed almost $4 in 2008 for each dollar in 1980.

The top 300,000 Americans now enjoy almost as much income as the bottom 150 million, the data show.

6. When it comes to corporations, the story is much the same — less taxes.

Corporate profits in 2008, the latest year for which data is available, were $1.8 billion, up almost 12 percent from $1.6 billion in 2000. Yet even though corporate tax rates have not been cut, corporate income-tax revenues fell to $230 billion from $249 billion — an 8 percent decline, thanks to a number of loopholes. The official 2010 profit numbers are not added up and released by the government, but the amount paid in corporate taxes is: in 2010 they fell further, to $191 billion — a decline of more than 23 percent compared with 2000.

7. Some corporate tax breaks destroy jobs.

Despite all the noise that America has the world’s second highest corporate tax rate, the actual taxes paid by corporations are falling because of the growing number of loopholes and companies shifting profits to tax havens like the Cayman Islands.

And right now America’s corporations are sitting on close to $2 trillion in cash that is not being used to build factories, create jobs or anything else, but act as an insurance policy for managers unwilling to take the risk of actually building the businesses they are paid so well to run. That cash hoard, by the way, works out to nearly $13,000 per taxpaying household.

A corporate tax rate that is too low actually destroys jobs. That’s because a higher tax rate encourages businesses (who don’t want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

The 2004 American Jobs Creation Act, which passed with bipartisan support, allowed more than 800 companies to bring profits that were untaxed but overseas back to the United States. Instead of paying the usual 35 percent tax, the companies paid just 5.25 percent.

The companies said bringing the money home — “repatriating” it, they called it — would mean lots of jobs. Sen. John Ensign, the Nevada Republican, put the figure at 660,000 new jobs.

Pfizer, the drug company, was the biggest beneficiary. It brought home $37 billion, saving $11 billion in taxes. Almost immediately it started firing people. Since the law took effect, it has let 40,000 workers go. In all, it appears that at least 100,000 jobs were destroyed.

Now Congressional Republicans and some Democrats are gearing up again to pass another tax holiday, promoting a new Jobs Creation Act. It would affect 10 times as much money as the 2004 law.

8. Republicans like taxes too.

President Reagan signed into law 11 tax increases, targeted at people down the income ladder. His administration and the Washington press corps called the increases “revenue enhancers.” Among other things, Reagan hiked Social Security taxes so high that by the end of 2008, the government had collected more than $2 trillion in surplus tax.

George W. Bush signed a tax increase, too, in 2006, despite his written ironclad pledge to never raise taxes on anyone. It raised taxes on teenagers by requiring kids up to age 17, who earned money, to pay taxes at their parents’ tax rate, which would almost always be higher than the rate they would otherwise pay. It was a story that ran buried inside The New York Times one Sunday, but nowhere else.

In fact, thanks to Republicans, one in three Americans will pay higher taxes this year than they did last year.

First, some history. In 2009, President Obama pushed his own tax cut—for the working class. He persuaded Congress to enact the Making Work Pay Tax Credit. Over the two years 2009 and 2010, it saved single workers up to $800 and married heterosexual couples up to $1,600, even if only one spouse worked. The top 5 percent or so of taxpayers were denied this tax break.

The Obama administration called it “the biggest middle-class tax cut” ever. Yet last December the Republicans, poised to regain control of the House of Representatives, killed Obama’s Making Work Pay Credit while extending the Bush tax cuts for two more years — a policy Obama agreed to.

By doing so, Congressional Republican leaders increased taxes on a third of Americans, virtually all of them the working poor, this year.

As a result, of the 155 million households in the tax system, 51 million will pay an average of $129 more this year. That is $6.6 billion in higher taxes for the working poor, the nonpartisan Tax Policy Center estimated.

In addition, the Republicans changed the rate of workers’ FICA contributions, which finances half of Social Security. The result:

If you are single and make less than $20,000, or married and less than $40,000, you lose under this plan.

But the top 5 percent, people who make more than $106,800, will save $2,136 ($4,272 for two-career couples).

9. Other countries do it better.

We measure our economic progress, and our elected leaders debate tax policy, in terms of a crude measure known as gross domestic product. The way the official statistics are put together, each dollar spent buying solar energy equipment counts the same as each dollar spent investigating murders.

We do not give any measure of value to time spent rearing children or growing our own vegetables or to time off for leisure and community service.

And we do not measure the economic damage done by shocks, such as losing a job, which means not only loss of income and depletion of savings, but loss of health insurance, which a Harvard Medical School study found results in 45,000 unnecessary deaths each year

Compare this to Germany, one of many countries with a smarter tax system and smarter spending policies.

Germans work less, make more per hour and get much better parental leave than Americans, many of whom get no fringe benefits such as health care, pensions or even a retirement savings plan. By many measures the vast majority live better in Germany than in America.

To achieve this, single German workers on average pay 52 percent of their income in taxes. Americans average 30 percent, according to the Organizations for Economic Cooperation and Development.

At first blush, the German tax burden seems horrendous. But in Germany (as well as Britain, France, Scandinavia, Canada, Australia, and Japan), tax-supported institutions provide many of the things Americans pay for with after-tax dollars. Buying wholesale rather than retail saves money.

A proper comparison would take the 30 percent average tax on American workers and add their out-of-pocket spending on health care, college tuition, and fees for services and compare that with taxes that the average German pays. Add it all up and the combination of tax and personal spending is roughly equal in both countries, but with a large risk of catastrophic loss in America, and a tiny risk in Germany.

Americans take on $85 billion of debt each year for higher education, while college is financed by taxes in Germany and tuition is cheap to free in other modern countries. While soaring medical costs are a key reason that since 1980 bankruptcy in America has increased 15 times faster than population growth, no one in Germany or the rest of the modern world goes broke because of accident or illness. And child poverty in America is the highest among modern countries — almost twice the rate in Germany, which is close to the average of modern countries.

On the corporate tax side, the Germans encourage reinvestment at home and the outsourcing of low-value work, like auto assembly, and German rules tightly control accounting so that profits earned at home cannot be made to appear as profits earned in tax havens.

Adopting the German system is not the answer for America. But crafting a tax system that benefits the vast majority, reduces risks, provides universal health care and focuses on diplomacy rather than militarism abroad (and at home) would be a lot smarter than what we have now.

Here is a question to ask yourself: We started down this road with Reagan’s election in 1980 and upped the ante in this century with George W. Bush.

How long does it take to conclude that a policy has failed to fulfill its promises? And as you think of that, keep in mind George Washington. When he fell ill his doctors followed the common wisdom of the era. They cut him and bled him to remove bad blood. As Washington’s condition grew worse, they bled him more. And like the mantra of tax cuts for the rich, they kept applying the same treatment until they killed him.

Luckily we don’t bleed the sick anymore, but we are bleeding our government to death.

 

ABOUT THE AUTHOR:

David Cay Johnston is a columnist for tax.com and teaches the tax, property, and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management. He has also been called the “de facto chief tax enforcement officer of the United States” because his reporting in The New York Times shut down many tax dodges and schemes, just two of them valued by Congress at $260 billion.

Johnston received a 2001 Pulitzer Prize for exposing tax loopholes and inequities. He wrote two bestsellers on taxes, Perfectly Legal and Free Lunch. Later this year David Cay Johnston will be out with a new book, The Fine Print, revealing how big business, with help from politicians, abuses plain English to rob you blind.

 

Editor’s Notes

2

tredmond@sfbg.com

Calling for painful spending cuts, it turns out, is the easy part. Calling for relatively painless tax increases requires real political courage.

— The New York Times, March 13

The Times is hardly a crazy socialist rag; it’s always been the voice of the establishment, more Democrat than Republican but never even close to radical. The Gray Lady certainly can’t be accused of fomenting class warfare.

But in a calm, measured tone this week, the paper made the exact point about New York State that some of us whose politics lean a bit more to the left have been making about San Francisco.

The governor of New York, Andrew Cuomo, has presented the state Legislature with an all-cuts budget. The Times suggests that the wealthier residents of the state should share just a small amount of the economic pain. Extending a surtax on high earners would be more than tolerable, the paper notes:

“A couple with $350,000 in taxable income would simply continue to pay an extra $3,500; a couple with taxable income of $1.5 million would continue to pay $31,800 more. Those payments would be more than offset by the federal tax breaks those same taxpayers got with the recent renewal of the Bush-era tax cuts.”

Of course, in New York, as here, those state tax payments are deductible from the already-too-low federal income taxes the rich are paying.

It’s too much to ask that the San Francisco Chronicle pick up that line; the Chron, out here on the Left Coast, is far more conservative than the stodgy old Times. But you’d think that in a city where Republican voter registration is below 10 percent, that local officials — including a mayor who calls himself “progressive” — would be able to go at least as far as a moderate national newspaper.

Because the argument is pretty simple and basic.

Cuts in public services fall hardest on the poor and middle class. Families that can afford to join a private club don’t have to worry when hours at the city pools are cut back; their kids learn to swim anyway. People with good health insurance can try to ignore the conditions at San Francisco General Hospital. Private school parents think the size of classrooms in the public schools isn’t a big factor in their lives.

But it all comes back to haunt us, every one of us, in this city. When the number of beds in General’s psych ward is cut from 80 to 20, more people with severe mental illness are out on the streets. Cutting public schools not only makes class divisions more deeply entrenched, it damages the city’s economy.

As the Times says, painful cuts are easy. Taxing the rich never seems to be on the table