Taxes: Whither the Tax Revolt?

On June 3, Californians went to the polls and soundly defeated a Howard Jarvis-inspired proposal to slash state income taxes by half. As is the case so often in California politics, the 61-to-39 percent vote sharply etched the outlines of clashing political and social forces. Hence, some observations:

• As Evans & Novak noted a week before the vote, "fear" was the key to the victory of what the columnists call "the governing class." That is, California taxpayers were convinced this time—as they manifestly were not in 1978 with Proposition 13—that if the bureaucrats' share of taxpayer income was cut, vital services would be disrupted as much as possible. The powerful educational combine was particularly effective, when University of California students and schoolchildren's parents were sent letters threatening severe program cutbacks and declines in educational quality.

• The June 3 Proposition 9 vote was different from the victorious Proposition 13 vote in 1978 because people's homes were not involved this time. Prop. 13, remember, was a property tax cutback. People were actually being forced to sell their homes and move due to virulently escalating property taxes. In the case of Prop. 9, the entire question was state income tax levels—and that meant a vote on a tax that is widely viewed as "fair" by taxpayers.

• Two forms of class warfare were exhibited in the battle over Prop. 9, one of which is old hat, the other relatively new and growing. The governing class sought to exacerbate the older type of class warfare, as tax consumers do in any such contest. "The Rich Will Benefit" is the tacky call to arms. Polls before the vote indicated that such appeals to greed and envy were not working; nevertheless, the "progressive" income tax is basically an institutionalized form of covetousness. Second, we see a newer, emerging pattern of class warfare: the governing class (or tax consumers) versus working people (or tax payers). Little noted during the campaign was the fact that—in addition to the current $2.5 billion state surplus—California property tax receipts by 1982 will exceed pre-Proposition 13 levels. This point meant little to the tax-consuming class: any reduction in tax collections means a decrease in their power, and that must be fought.

• Howard Jarvis is finally effectively playing the role that the anti-tax-reduction media chose him for in the 1978 Prop. 13 battle. Although the cranky, uncooperative 77-year-old hindered the 1978 campaign—as the mainline California media knew he would when they painted him as the "leader of the tax revolt"—the groundswell against excess taxation then was too strong. This time the strategy paid off more handsomely: Jarvis offended many with such one-liners as, "If the kids can't read, what's the use of libraries?" when questioned about threatened cutbacks. On another occasion, when a female heckler suggested he leave the state of California, Jarvis told her she "should go to Nevada to one of the houses they have there," meaning Nevada's legal brothels.

• The staying power of the tax-consuming coalitions is enormous, while that of the tax-paying groups in society is easily fractured and often shifting. This is easy to see, since the interests of the tax consumers are concentrated and sharply defined—like a gigantic, indestructible bureaucracy. On the other hand, working people have myriad other concerns and duties that take up their time and energy. The tax-consuming coalitions can devote all or most of their time to fighting threats to their power and privileged positions—after all, their very livelihood depends on it.

All of which spells bad news for taxpayers. Indeed, there may be a historical process at work here, involving any democratic society where unproductive or antiproductive elements are allowed to gain a position of power which they may solidify. In the Prop. 9 campaign, public employee unions alone poured over $1 billion into the fight to defeat the threatened tax reduction. On television, perhaps $100,000 was spent on pro-Proposition 9 television spots, while almost $700,000 was spent to defeat it.

What's the prognosis? The war is not over, by any means. Merely a temporary setback ("This is not the end of the tax revolt. It's a pause," said California Gov. Jerry Brown.). In the meantime, the battle continues, both in California and other states. And, it might be noted, the taxpayers' counterattack is increasingly taking, not one, but two forms: while both state and national taxpayer coalitions continue to press for political solutions to excessive taxation, the subterranean economy—which might be called the "social solution"—steadily deepens, expands, intensifies…

Timothy Condon is a tax specialist and attorney with the Condon & Vollrath Tax Service in Tampa, Florida.