In summary

The governor’s proposal to temporarily raise funds from some businesses would generate $4.4 billion, but it remains woefully inadequate. More can be done.

By Ron Hayduk and

Ron Hayduk is a professor at San Francisco State University, whose research focuses on civic engagement and immigration, rhayduk@sfsu.edu.

and Anthony Pahnke, Special to CalMatters

Anthony Pahnke is a professor at San Francisco State University, whose research deals with social movements, development and trade policy, anthonypahnke@sfsu.edu.

The nationwide protests against police brutality have made one thing painfully clear – uprooting systemic racism will require profound changes in public policy.

Integral to any policy discussion is a fully funded public sector, including schools and universities that are particularly well-poised to address everything from the achievement gap to unconscious bias throughout the state. 

The problem is that the pandemic hit our state’s economy particularly hard. 

In fact, it hit so hard that Gov. Gavin Newsom’s proposed budget would cut $6.5 billion from K-12 schools.  Higher education would experience an across the board cut by 10%

California legislators in the Senate and Assembly crafted a Plan B, which lessens and defers the pain, yet still inflicts cuts that hurt poor people and people of color.  As we know, such groups are already suffering disproportionately from the pandemic in terms of job loss and deaths.

The governor and Legislature are banking on the federal government to come to the rescue; in May, the House of Representatives passed the Heroes Act that earmarks $1 trillion for the states, which would help fill California’s projected $54 billion budget deficit, enabling us to maintain schools, health care, transportation and other vital public services. 

The problem with this plan is twofold.  First, the Heroes Act was pronounced dead on arrival by the GOP.  And second, even if future aid eventually comes, it would only fill 26% of the budget shortfall and planned cuts.

Meanwhile, the Legislature approved Newsom’s modest proposal to temporarily raise funds from some businesses, which would generate $4.4 billion.  While this proposal moves us in the right direction, it remains woefully inadequate. 

Much more should and can be done. 

Specifically, our state leaders have the power to increase taxes on the states’ corporations and millionaires and billionaires, which would avoid cuts altogether.

There are several viable options. 

One is to increase the income tax by 2% for those who make more than a million dollars a year.  This proposal, according to one study, would generate about $6 billion per year.

Another option would be to impose a 1% tax on the wealth – for instance, on dividends and stock transfers – of millionaires and a 1.5% tax on the wealth of billionaires, which would generate $18 billion annually.

A third option would be to close corporate loopholes and enact an “excess” profits tax on corporations that are raking in more money than usual during the pandemic, largely due to how the lockdown has increased the value of their services, as is the case especially for tech companies

There are several good reasons for our representatives to seriously consider these proposals. 

First, our state has more billionaires and millionaires than any other –  165 billionaires, with an estimated combined net worth of more than $723 billion.  Also, our state boasts over 1 million millionaires, who together lay claim to billions of dollars.

Second, increasing the taxes on the rich actually helps them.

After all, people are rich in large part due to the educational system that nurtures and mentors the students who become their engineers, computer technicians and software programmers. 

Third, most of the public supports this idea.  Public opinion consistently and overwhelmingly supports taxing the rich, across parties. A recent poll of California voters shows that 66% of all voters support increasing the top personal income tax from 13% to 15%, including 83% of Democrats, 60% of independents and 40% of Republicans. 

But wait – will additional taxes cause the wealthy to leave?  History says no.  In 2004 and 2012, California raised taxes.  And, according to a Stanford University study, the state’s economic elite stayed put.

Budgets are political documents; they embody choices about who to tax and what to spend funds on, reflecting which groups are valued and what is prioritized.  To significantly cut education sends the wrong message, especially to young people. 

Fully funding our schools is our best economic development strategy, as well as central to any coordinated effort to challenge systemic racism in our society. 

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