Heads Up Millionaires; You’re The Target

California voters will have not one but three chances to take down rich people with a "Millionaires" tax.

California voters will have not one but three chances to take down rich people a peg or two as supporters of two ballot initiatives that would raise taxes on the state’s wealthiest people, ostensibly to fund public education and other services, say they’re not backing down from their efforts.

(NOTE OF IRONY: Bet Zuckerberg and the Facebook folks are just thrilled now with the timing of their IPO; a whole crop of millionaires being created just in time to get dinged by taxes. That'll teach you to be successful.)

Those other two initiatives could upend Gov. Jerry Brown's crusade to clear the November ballot of any competing tax measures so his take on the “millionaires’ tax” can pass. Or California voters could do what they almost always do when faced with competing or multiple measures on the same subject - reject all three.

Backers of the so-called "Millionaires Tax" officially began signature gathering last week, while proponents of the other measure, “Our Children, Our Future,” got a pledge from the primary backer that she would “spend millions” to get the initiative on the ballot.

"The Millionaires Tax of 2012" is supported most prominently by the California Federation of Teachers (CFT), the Courage Campaign (a liberal grassroots advocacy clan), and the California Nurses Association (CNA). Signature gathering has already started on the proposal which increases income taxes on people who earn more than $1 million a year in California. It will generate $9.5 billion annually, with the majority of the revenue dedicated to education (beneficiary: CFT), health services (beneficiary: CNA) and public safety. It has no expiration date.

This is all so Obama-esque. As you may recall, President Obama’s plan is to enact a higher tax rate for people making more than $1 million a year. The Prez said his plan – which he calls “The Buffett Rule” - is to make sure the nation's wealthy pay at least the same tax percentage as the middle class.

Meanwhile, with "Our Children, Our Future," the income tax for everyone in the state would increase, though the largest escalation wil fall on the highest wage earners. The prime backer is Molly Munger, a civil rights attorney from SoCal whose family is worth billions. She estimates the proposal would generate $10 billion a year that would be dedicated solely to education, with criminal penalties if lawmakers try to adjust it. It expires after 12 years. (Munger has given $800,000 so far to the effort.)

The Governor's plan would increase the sales tax by half a cent along with raising income taxes on individuals with annual incomes of $250,000 or more. It’s estimated to bring in $7 billion per year and would sunset after five years.

Both “The Millionaires Tax” posse and the "Our Children, Our Future" clique predictably expressed confidence that conventional wisdom is wrong, wrong, wrong and that one or more of the tax measures could pass even with multiple initiatives on the ballot. In typical tax the rich mode, it’s ready, fire, aim.

But the better analysis came from Steve Glazer, the Gov’s top political adviser. He is reported as saying the probable impact of multiple measures is that all of them would receive diminished support; comparing all the efforts to a circular firing squad.  Somehow apropos.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Georgia Jack February 10, 2012 at 12:09 AM
Molly Munger is the daughter of Charlie Munger -- who's that? A colleague of Warren Buffet. There is something circular- two of the richest families in America care about ensuring opportunities for all. It seems to me that Molly deserves credit for at least doing something about funding in California. This isn't about Molly Munger - she'd be taxed, too. And I doubt she is much affected by education cuts. She is however demonstrating concern for the future of California.If education continues to sustain large cuts up and down the preK to university system, California is not too big to fail.
Lou Covey, The Local Motive February 12, 2012 at 05:31 PM
Unfortunately, it won't do anything to raise the taxes on people like Munger and Buffett. The truly wealthy make their money off investments, not salaries, so their effective tax rate is 9.3 percent. None of the three bills actually touches that. It also doesn't affect all those new Facebook millionaires, because they get taxed only when they sell their shares (at 9.3 percent), but they CAN use them for collateral on loans so they can get their millions and pay the banks less than 9.3 percent for that money. It's really a tax on people who earn an INCOME of more than $1 million a year. That means people who own moderately successful small businesses who support several people. You know... the middle class. None of the taxes does anything to deal with the wealth inequity. All these taxes are is a means for the legislators and their well-heeled buddies to make the electorate THINK they are doing something positive, while the entire time, all they are doing is handing over their wallets to Sacramento.
Lou Covey, The Local Motive February 12, 2012 at 05:32 PM
As an aside, you know that Warren Buffet has been fighting the IRS on a tax bill of $700,000,000, right? He says he shouldn't have to pay that much. so much for principals.
Roger Brina February 12, 2012 at 08:42 PM
Ha! Hilarious that anyone can claim with a straight face that a seven-figure income puts a person in the "middle class." Is that what the middle class is now?
Roger Brina February 12, 2012 at 08:47 PM
ORWC voted to endorse the Millionaires' Tax over the Gov.'s proposed tax hike for several reasons: 1. The Gov's plan would tax those making $250,000 or more, which would adversely affect many who run those "moderately successful small businesses" that Lou Covey mentions. Millionaire's Tax would raise income tax by a mere 3% on millionaires, and 5% if you make $2 million or over. 2. The Gov's plan includes a regressive sales tax hike. 3. Under the Millionaires' plan the money stays with local governments and cannot be raided by the state. 4. The Gov's plan would amend the state Constitution for the purpose of "realignment." As for Munger's plan, it's laughable on its face. Raising income taxes on EVERYone is not the solution. We live in a country where the richest 400 families own 18%, or nearly one-fifth of the nation's wealth. The rich can afford to pay more and help the 99%.
Chris Manton February 12, 2012 at 08:59 PM
This article propagates the typical subterfuge conflating cash flow and net worth when using the term "Millionaire". Granted, this appears to be a wide spread misconception that's rarely identified in media or by politicos. Earning 1 million dollars within a given tax year does not create a millionaire. A Millionaire is defined as somebody with a net worth of 1 million dollars or more. http://en.wikipedia.org/wiki/Millionaire If follows that there is a high degree of correlation between cash flow and net worth, and subsequently a high degree of causality. That is, higher wage earners tend to have greater net worth, and lower wage earners will have a lesser net worth. Lou is correct; this does nothing to deal with (net) wealth inequity. Other than the sales tax, these measures will not affect the majority of Californians nor the "net worth" millionaires. It would affect "cash flow" millionaires __within_their_higher_tax_bracket__, not in lower tax brackets. With respect to the irony of the Facebook comment. I'm not sympathetic to the rich-on-paper Facebook employees new found wealth and the tax implications. However, I'm betting it will garner sympathy from a surprisingly large percentage of people who live in delirium that they will a "One percenter" someday.
Lou Covey, The Local Motive February 12, 2012 at 10:58 PM
Roger, I'm not sure if you are a small business owner but I'm assuming you are not. I am, come from a family a long line of small business owners, am friends with many small business owners and advise many small businesses. Almost any moderately successful non-chain restaurant in Redwood City will create an income of 7 figures and most are S-Corps or LLCs. Each of these is taxed on the basis of that income. Most of the owners take a "draw" rather than a salary and they take care of their families, many of them extended, with that money. None of them live in the lap of luxury but most make a good living and they employ many of the people in our town. They are not, in the least, what is characterized as the one percent, but they are most definitely in that level. Their tax rates are far above the Mungers and Buffetts of the world. All three measures will increase the taxes on those people, not on the Mungers and the Buffets. That's all I'm saying.
Eggbert February 19, 2012 at 05:40 PM
Quick perusal of relevant news coverage shows that Fox and its ilk are the only venues presenting the story as "Warren Buffett suing this IRS". Less agenda-driven outlets prioritized accuracy: it's NetJets, a unit of Berkshire Hathaway, behind the suit. And they make a rather good case that their tax bill at least merits review: http://online.wsj.com/article/SB10001424052970203611404577046374108267952.html Although admittedly, "Warren Buffet Sues the IRS" is a much juicier headline and serves to bolster a specific world view, it confuses rather than illuminates. Granted the sources, I'm sure that's intentional.
Lou Covey, The Local Motive February 19, 2012 at 08:36 PM
Eggie, you equate the HuffPo with rightwing media? Wow, You are liberal. http://www.huffingtonpost.com/2011/08/29/warren-buffett-taxes-berkshire-hathaway_n_941099.html
Roger Brina March 13, 2012 at 05:53 PM
For some reason your most recent "Aye, There's the Rub" piece is not open to comments, so I'll have to leave my response here. Less than one percent of California households make over a million dollars a year. So for you and others (like Lou Covey in the comments of this particular blog entry) to try and portray this as a tax on the average middle-class person is highly disingenuous. Furthermore: unlike the federal tax code, California's tax code does not treat capital gains differently than regular income. This means that both capital gains and regular income are taxed at the same rate. In other words, your claim that this tax initiative won't do anything to increase the tax burden on the super-rich who make money off investments is false at best and deliberate obfuscation at worst. "Aye, there's the rub" indeed. Finally, thanks for the shout out to Occupy Redwood City. I can't speak for the others of our General Assembly but I appreciate the publicity, even when it's snarky.
Lou Covey, The Local Motive March 13, 2012 at 05:57 PM
Roger, you're right that cap gains and income are taxed the same in California, however, they aren't taxed until the asset is sold. So someone who is a millionaire on paper isn't taxed until they sell their stock. And by keeping their sales below the threshold, they can get a nice living without ever earning a pay check. But some restaurant owner with a million in revenues, he does have to pay.


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