The state's water hogs and Silicon Valley's tech shuttles benefit from the same tax exclusion.
Solving California's water crisis got a lot harder on Monday when a state appeals court struck down steeply tiered water rates in the city of San Juan Capistrano. Like many other California cities, this affluent Orange County town encourages conservation by charging customers who use small amounts of water a lower rate per gallon than customers who use larger amounts. The court ruled that the practice conflicts with Proposition 218, a ballot measure that, among other things, bars governments from charging more for a service than it costs to provide it.
In the process of thwarting taxation without voter approval, Prop. 218 stops state and local governments from addressing urgent problems, such as drought.
The drought isn't the only way Prop. 218 is hamstringing California cities. Early last year, San Francisco's Municipal Transportation Agency announced a controversial pilot program that would allow Google buses and other tech shuttles to use public bus stops for $1 a stop. Activists, who saw the shuttles as symbols of inequality and out-of-control gentrification, wanted the agency to charge Google much more than that and use the profits to subsidize the city's chronically underfunded public transit system. But MTA officials argued that their hands were tied: Prop. 218 prevented them from charging more than the estimated $1.5 million cost of administering the program.
Prop. 218, the "Right to Vote on Taxes Act," was a constitutional amendment drafted in 1996 by the Howard Jarvis Taxpayers Association, the group that led the tax revolt that swept California in the 1970s and eventually helped elect President Ronald Reagan. After 1978, when the group's signature initiative, Prop. 13, began severely limiting property tax increases, cities and counties moved to plug their budgetary holes with other types of taxes and fees. Prop 218 was designed to constrain those workarounds by requiring that any new tax be approved by voters or affected property owners. For the purposes of the act, taxes included any fees from which a government derived a profit.
Prop. 218 has been widely criticized for making it harder for cities to raise revenues, but the recent cases with water rates and tech shuttles point to another issue: the way the initiative prevents state and local governments from addressing urgent social and environmental problems. It's worth remembering that withdrawing water from California's dwindling reservoirs to feed verdant lawns is in itself a tax of sorts, and Mother Nature may not wait until the next election to revoke our ability to levy it.
Fast-food cooks and cashiers demanding a $15 minimum wage walked off the job in 236 cities yesterday in what organizers called the largest mobilization of low-wage workers ever. The tax-day protest, known as Fight 4/15 (or #Fightfor15 on Twitter), caused some backlash on the Right:
So, in demanding ridiculous wages for jobs that require no skill, #FightFor15 has ensured more people remain unemployed. Retards.
Conservatives have long portrayed minimum-wage increases as a harbingers of economic doom, but their fears simply haven't played out. San Francisco, Santa Fe, and Washington, DC, were among the first major cities to raise their minimum wages to substantially above state and national averages. The Center for Economic and Policy Research found that the increases had little effect on employment rates in traditionally low-wage sectors of their economies:
Economists with the Institute for Research on Labor and Employment at the University of California-Berkeley have found similar results in studies of the six other cities that have raised their minimum wages in the past decade, and in the 21 states with higher base pay than the federal minimum. Businesses, they found, absorbed the costs through lower job turnover, small price increases, and higher productivity.
It's the taxpayers who ultimately pick up the tab for low wages, because the government subsidizes the working poor.
Obviously, there's a limit to how high you can raise the minimum wage without harming the economy, but evidence suggests we're nowhere close to that tipping point. The ratio between the United States' minimum wage and its median wage has been slipping for years—it's now far lower than in the rest of the developed world. Even after San Francisco increases its minimum wage to $15 next year, it will still amount to just 46 percent of the median wage, putting the city well within the normal historical range.
The bigger threat to the economy may come from not raising the minimum wage. Even Wall Street analysts agree that our ever-widening income inequality threatens to dampen economic growth. And according to a new study by the UC-Berkeley Labor Center, it's the taxpayers who ultimately pick up the tab for low wages, because the federal government subsidizes the working poor through social-service programs to the tune of $153 billion a year.
A lot of people think the federal tax code should be more progressive, but it looks downright socialist compared to the typical state tax code. A chart released last week by Citizens for Tax Justice puts it in context, showing how the wealthy typically pay lower state tax rates:
Citizens for Tax Justice
This problem isn't limited to conservative states: According to a recent report by the Institute on Taxation and Economic Policy (ITEP), every state places a higher effective tax rate on the poor than it does on the rich. In fact, several of the nation's most politically progressive states count among the worst when it comes to shoveling the tax burden onto low-income people and the middle class.
The nation's most regressive tax code belongs to Washington, a state that was ranked by The Hill last year as the bluest in the country based on its voting patterns and Democratic dominance. The poorest 20 percent of Washingtonians pay an effective state tax rate of 16.8 percent, while the wealthiest 1 percent effectively pay just 2.4 percent of their income in taxes.
There's a clear explanation for that: Washington has no income tax and thus heavily relies on a sales tax that disproportionately affects the poor. What's harder to grasp is why Washington's liberals put up with it.
Structural conditions help explain why regressive taxes endure in Washington and many other states. Some states require supermajorities to raise taxes or have constitutions that mandate a flat tax. In Washington's case, voters approved a personal income tax in 1932 by a two to one margin but were overruled the following year by the state Supreme Court, which decided that a constitutionally mandated 1 percent cap on property taxes also applied to income. An income tax bill passed by the state legislature a few years later was likewise struck down.
But the courts, weirdly, are no longer the biggest obstacle to a fairer tax code in Washington; over the years, they've gradually overturned most of the legal precedents that had been used to invalidate an income tax, and most experts believe such a tax would become law today if passed. The bigger problem is voters. In 2010, Washingtonians rejected by a whopping 30-point margin a proposal to establish an income tax that would only have applied to people earning more than $200,000 a year.
How do you square this with California, where, just two years later, a similar tax hike on the wealthy easily sailed through? Or with Oregon, Washington's political cousin, which has long had a progressive income tax?
I asked John Burbank, the executive director of the Seattle-based Economic Opportunity Institute and an architect of Washington's failed 2010 income tax measure, why he thought the measure had failed to pass. At first, he cited the off-year election and opposition scare tactics. But when pressed, he offered a third explanation that I think makes more sense: "There is almost like a cultural prohibition that exists."
In other words people, liberal or conservative, who live in states with low or no income taxes get used to paying little. They may differ on protecting the environment, legalizing weed, or raising the minimum wage, but when you start to mess with the system on which they've built their personal finances, they get scared and balk. This is why changing the tax code is so hard, even in states where people may in their hearts believe it's the right thing to do.
Until recently, your typical banker was someone whose main job was to accept deposits, cash checks, and dispense basic financial advice. But now that job hardly exists anymore—at least not as we once knew it. Today's front-line bank workers—tellers, loan interviewers, and customer-service reps—earn far too little money to be considered "bankers" in the traditional sense of the word. And though they still collect and dispense money, their main job involves hawking credit cards and loans you probably don't need.
Many rank-and-file bank workers are seeing lower wages and more pressure to hawk financial products.
Rank-and-file bank workers are both causes and symptoms of America's widening economic divide, says Aditi Sen, the author of Big Banks and the Dismantling of the Middle Class, a report released today by the Center for Popular Democracy. Based on union organizer interviews with hundreds of workers in the industry, Sen found that front-line bank workers often face quotas for hawking potentially exploitive financial products, often to low-income customers, even though the workers themselves barely qualify as middle class. "We can definitely see bank workers as part of the same continuum of issues facing all low-wage workers," she says.
Banks are, of course, notorious for squeezing profits from their employees and customers. In 2011, the Federal Reserve Board fined Wells Fargo $85 million for forcing workers to sell expensive subprime mortgages to prime borrowers. And in late 2013, a judge slapped Bank of America with a $1.27 billion penalty for its "Hustle Program," which rewarded employees for producing more loans and eliminating controls on the loans' quality.
Yet, by some accounts, these sorts of practices are getting worse. In a 2013 study by the union-backed Committee for Better Banks, 35 percent of low-level bank workers surveyed reported increased sales pressure since 2008, and nearly 38 percent stated that there was no real avenue in the workplace to oppose such practices. One HSBC bank employee, according to the study, reported that workers who failed to meet their sales goals had the difference taken out of their paychecks.
The increasing sales pressure comes at a time when the fortunes of the banks and their low-level workers have diverged widely. Bank profits and CEOpay have rebounded to near record levels while wages for front-line workers are stuck in the gutter.
Bureau of Labor Statistics
And that's not all. Nearly a quarter of bank workers surveyed in 2013 reported that their benefits had been cut since 2008, and 44 percent reported that their medical and life insurance was inadequate. A recent University of California-Berkeley study found that 31 percent of bank tellers' families rely on public assistance at an annual cost of $900 million to taxpayers.
There are several factors in all of these woes. Mergers and consolidation have led some retail banks to shutter branches and lay people off. Many banks have outsourced customer-service jobs to overseas call centers, and the rise of internet and smartphone banking has further slashed demand for flesh-and-blood tellers. In other words, it's basically the same mix of foreign and technological competition that has concentrated wealth and depressed middle-class wages throughout the economy. And it means that banks can get away with paying people less, and demanding more in return.
But now the Committee for Better Banks is trying to cultivate common cause between low-level bank workers and the customers they're forced to target. The interviews featured in the new report show that many bank workers strongly oppose the sales quotas as unfair and exploitive. For instance:
A teller at a top-five bank reports that she is subject to stringent individual goals on a daily basis: If she does not make three sales-points (selling someone a new checking, savings, or debit card account) each day in a month, she gets written up.
Customer service representatives at a call center for another major bank report that each individual has to make 40 percent of the sales of the top seller to avoid being written up. Selling credit cards counts more towards sales goals than helping someone open up a checking account or savings account, thereby crafting skewed incentives based on the profitability of a product sold, not on how well it matched the needs of a customer.
"There was one guy who had three credit cards and I ended up pushing a fourth on him, even though I knew that was not good for him."
"A lot of time people would call and already have one, two, or three credit cards with us," says Liz, a member of the Committee for Better Banks who worked in a Bank of America call center for five years and did not want to give her last name. "They might have a situation where they are low on funds and we end up pushing another credit card on them. There was one guy who had three credit cards and I ended up pushing a fourth on him, even though I knew that was not good for him; he would just be in more debt. But if didn't, I would end up being put in a reprimand."
On Monday, members of the Committee for Better Banks will converge in Minnesota's Twin Cities to deliver a petition to bank offices demanding better pay and more stable work hours for rank-and-file workers, and an end to sales goals that "push unnecessary products on our customers."
Sen. Bernie Sanders of Vermont, the longest-serving independent in Congress and its only self-described democratic socialist, is best known for his stands against wealthy special interests and in favor of government programs that help the poor and the middle class. Now 73, Sanders announced last year that he may run for president in 2016. During a swing through San Francisco this week, he stopped by Mother Jones HQ to talk to us about America's greed problem, the fecklessness of Democrats, and how to catalyze the progressive movement.
"Between 2013 and 2015, the wealthiest 14 people saw their wealth increase by $157 billion."
Mother Jones: What have you been up to lately?
Bernie Sanders: I'm going around the country talking about what I believe is the most important issue facing the American people: the grotesque level of income and wealth inequality. The Koch brothers and a few others are attempting to buy the United States government, and that should be of concern to everybody.
MJ: How bad is inequality now, in your view?
BS: Between 2013 and 2015, the wealthiest 14 people saw their wealth increase by $157 billion. This is their wealth increase, got it? Not what they are worth. Increase. That $157 billion is more wealth than is owned by the bottom 40 percent of the American people. One family, the Walton family, owns more wealth than the bottom 40 percent.