California's anti-tax crusaders talk revolt

LOS ANGELES (Reuters) - Taking inspiration from a landmark 1970s tax revolt, a determined group of activists say the moment is right for another voter uprising in California, where recession-battered residents have been hit with the highest income and sales tax rates in the nation.

Anita Dwyer (L) and Bea Severson hold signs as they participate in a rally and march in protest of higher taxes in Santa Barbara, California in this file photo taken April 4, 2009. Taking inspiration from a landmark 1970s tax revolt, a determined group of activists say the moment is right for another voter uprising in California, where recession-battered residents have been hit with the highest income and sales tax rates in the nation. REUTERS/Phil McCarten/Files

And like Proposition 13, the 1978 ballot measure that transformed the state’s political landscape and ignited tax-reform movements nationwide, they see the next backlash coming not from either major political party, but from the people.

If the anti-tax crusaders can galvanize voter discontent, they hope to roll back the latest tax hikes, impose permanent, iron-clad spending caps on Sacramento lawmakers and make the issue central in the 2010 gubernatorial election.

“There’s a lot of latent anger boiling to the surface out there,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association, a group named after the California anti-tax crusader who spearheaded Prop 13.

An angry mob of thousands converged on an Orange County parking lot in southern California on a recent Saturday morning for an anti-tax protest, stunning even the organizers with the size of the turnout. It was just one in a series of public demonstrations that have cropped up around the state.

Talk of a brewing tax revolt has been largely ignored by the mainstream media, and many political analysts are skeptical, though they concede that the taxpayer mutiny that led to the landmark Prop 13 was similarly dismissed by political professionals.

That referendum passed in a landslide despite furious opposition from the political establishment -- and highlighted the possibilities for grassroots campaigners to enact measures with ballot initiatives and bypass the legislature.

It slashed property tax rates by 57 percent, capped future collections and required any new tax hikes to be approved by a two-thirds majority in both houses of the state legislature.


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“There’s no way to predict whether we’re going to see a reprise of the revolt that led to Prop 13 or whether this is a false start,” said Dan Schnur, director of the Jesse Unruh Institute of Politics at USC and a onetime adviser to presidential candidate Sen. John McCain.

“But the economic conditions are ripe for tax revolt, and advances in technology certainly make it easier to organize a coalition without access to huge amounts of money.”

Those conditions include a heavy tax burden that is growing heavier plus a worsening economy.

California already had the highest income tax rates of any state in the country when the legislature raised them in February to help close a $42 billion deficit that also required deep spending cuts and additional borrowing.

The state’s top income tax rate is now 10.425 percent, which is 1.5 percentage points higher than second-place Rhode Island and rises to 10.55 percent if certain economic triggers are hit. Most U.S. states have a top rate of less than 7 percent, and seven collect no income tax at all.

California lawmakers also boosted the state’s sales tax to 8.25 percent, nearly doubled the vehicle license fee and sharply reduced the tax credit for dependents.

Though Prop 13 has become sacrosanct in California politics, it has its critics, who blame it for forcing the state to rely too heavily on sales and income taxes and limiting a critical funding source for public schools.

The state, which was hard hit by the subprime mortgage crisis, faces sharply declining revenues and an unemployment rate over 10 percent.

“I certainly don’t want my taxes raised but one thing I do recognize is that we are in the middle of a financial meltdown,” California Assembly Speaker Karen Bass, a Democrat, told Reuters in an interview.

“We have a constitutional obligation to balance the budget so we had no choice” but to raise taxes, Bass said. “Unfortunately when you fan the flames you can lead to things like a revolt but I’m certainly hoping it doesn’t deteriorate to that.”


Analysts also say the anti-tax revolutionaries would be met with fierce opposition from California’s public employee unions, a powerful political force with considerably more money and unmatched influence over the Democrat-led legislature.

But the activists are undaunted by doubters within the establishment.

“Every chamber of commerce, every editorial board, every labor group, every tax-receiver group, everybody opposed Prop 13 except the voters,” Coupal told Reuters. “That reflects a massive disconnect between the real people and the political elite, and that disconnect is right now as great as I’ve ever seen it.”

The first test of anti-tax crusaders’ influence could come in a May 19 special election with voting on Proposition 1A, which is backed by California Governor Arnold Schwarzenegger and Democratic leaders and would extend the tax increases in exchange for a new cap on spending.

At the Orange County anti-tax rally, sponsored by two radio talk show hosts, voters’ resentment erupted as they chanted slogans, waved placards and demanded action in the state capital Sacramento.

“There was a huge amount of anger,” said John Kobylt, talk show host on KFI-AM 640. “It was visceral. You could feel it. You could almost touch it. It was almost frightening to be out there. It was a tremendous expression of hatred over what’s going on.”

Editing by Cynthia Osterman and Steve Gorman