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California proves it’s not as liberal as you think

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OAKLAND, Calif. — The myth of lockstep liberal California took a hit this election.

Voters in the deep-blue state rejected a progressive push to reinstate affirmative action, sided with technology companies over organized labor and rejected rent control. They are poised to reject a business tax that had been a decadeslong priority for labor unions and Democratic leaders.

President Donald Trump regularly portrays California as a land of complete liberal excess, and Democrat Joe Biden currently has 65 percent of California’s vote. Yet decisions on ballot measures this week reflect a state that remains unpredictable, flashing a libertarian streak with a tinge of fiscal moderation within its Democratic moorings.https://e3b374dfacf220d92b4c6008a9eb8004.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

“We’re not going to go for everything that’s progressive,” said Mindy Romero, head of the University of Southern California’s Center for Inclusive Democracy. “We think of ourselves as such a progressive state, and I’ve always said we’re a blue state but really we’re many shades of blue.”

California has long been an incubator for policies that go national, so industries and labor unions know that winning a ballot fight here has much wider implications. Already, Uber CEO Dara Khosrowshahi said Thursday that he wants to build on his California success by pursuing the same law in other states and nations. And just as the state’s 1996 affirmative action ban touched off a similar set of laws across the nation, the California vote this week could deter other states from trying to reinstate racial or gender preferences.

The ballot outcomes underscore that California voters are not a liberal monolith even as Democrats enjoy unprecedented control in the state that produced Republican presidents Ronald Reagan and Richard Nixon.

Liberals thought 2020 was their moment to secure long-desired changes: California’s electorate has steadily more diverse and Democratic in recent decades, relegating its once-mighty Republican Party to the political margins. A deeply galvanizing presidential election tantalized liberal groups as a potential high-water mark for turnout and a chance to enshrine ambitious ideas.

Decades after a more Republican California electorate curtailed property tax increases in 1978 and banned affirmative action in 1996, campaigns believed that demographic shifts would produce different outcomes a generation later.

But they seemingly miscalculated. There was no bigger example than voters’ decisive rejection of Proposition 16. The ballot measure would have reinstated affirmative action and directly repudiated what liberals consider a racist chapter of California’s recent past.

State lawmakers, inspired by a summer of racial justice activism, saw a rare window to repeal Proposition 209, the 1996 law backed by then-Gov. Pete Wilson, a Republican widely blamed for turning Latino voters against the GOP for good in the state. The affirmative action ban passed when California still had a white majority population, and it was the second major wedge issue initiative that Wilson championed.

Many of the Democratic lawmakers of color who placed the repeal measure on this year’s ballot were inspired to enter politics during that divisive era. They saw Proposition 16 as not only a legal change but a moral imperative — and figured voters would as well.

The ballot measure had a clear cash advantage with $31 million from wealthy activist donors and foundations, compared to only $1.6 million raised by opponents. Yet it failed badly, securing only 44 percent support as of Thursday.

California is not uniformly liberal. It is still home to millions of Republicans, while the ever-larger Democratic tent includes plenty of moderates. And the state’s booming minority population still lags in voter participation.

“We have a history of being a more red state,” Romero said. “A big reason why California is blue is because of the growth of communities of color, most dominantly because of the growth of the Latino community,” but “it does matter the shape of the electorate. We still have a voting electorate that is white, wealthier, better educated than the rest of our population.”

Democrats saw a chance to go after another long-sought target: commercial property tax hikes.

Since its passage in 1978, Proposition 13 has been blamed for starving governments and schools of tax dollars by keeping property taxes low relative to the soaring value of housing and commercial real estate in California. Liberals acknowledge the political reality that they can’t convince homeowners to repeal Prop 13 provisions on residential property, often called the third rail of California politics. But they have long wanted to untether business property from the same protections.

Unions, education groups and the foundation started by Facebook CEO Mark Zuckerberg were so convinced that November 2020 was their best opportunity that they gathered enough signatures for the ballot twice, the second one taking revisions they believed were an easier sell. It landed on the ballot as Proposition 15.

They presumed that high turnout from liberals and anti-Trump voters would translate into an anti-business vote; their ads regularly featured white businessmen in board rooms as a foil. Yet the initiative is poised to lose, trailing with only 48.3 percent of the vote.

Former Assemblymember Catharine Baker, a moderate Republican who was the last GOP lawmaker from the Bay Area, suggested Prop 15’s failure could “be an example of how a gigamajority Legislature might have not its finger on the pulse of the California electorate.”

The pandemic loomed inescapably over the election and reshaped campaigns’ appeals to voters. On Proposition 15, for example, backers argued they needed the money more than ever during a debilitating recession, while opponents countered that it would be foolish to further burden reeling businesses. The message of economic caution appeared to resonate, Baker said.

“There’s just no embrace right now for Californians, many of whom are suffering economically, for more taxes, the possible cost of that, and any closure of economic activity,” Baker said. “It’s made all the worse by the pandemic, in a time like this you want people to be able to make a living and be able to afford living here.”

Yet, the California electorate defies easy conclusions. The criminal justice landscape was a mixed bag after a year of surging activism. Voters handily rejected law enforcement’s effort to increase property crime sentences and limit early prison releases. They overwhelmingly voted to enfranchise felony parolees. Progressive Los Angeles district attorney candidate George Gascón built an early lead over incumbent District Attorney Jackie Lacey in a bellwether contest for criminal justice reform.

But Californians voted to keep cash bail, repudiating a 2019 law that sought to prohibit it and undercutting a state-by-state movement to eliminate the practice. In rejecting Proposition 25, the electorate sided with bail companies that spent millions to stay in business. They also vindicated civil libertarians and criminal justice advocates who warned a replacement system of predictive algorithms would perpetuate discrimination.

Those dynamics led the bail bonds industry to adopt the rhetoric of criminal justice reformers in warning about systemic bias — a tactic that reflected a calculation that progressive messages would resonate with voters.

“I think they knew they had to in order to win,” said Democratic strategist Katie Merrill. “You can’t win statewide in California on issues unless you are appealing to Democrats and progressives, and they knew they had to do it.”

Those licking their wounds this week pointed to one thing: money.

They said massive campaign spending can be a better predictor than partisan affiliation when it comes to ballot initiatives. Health care unions failed again to rein in kidney dialysis providers after they were outspent enormously by the dialysis industry’s $100 million counterattack. Real estate groups poured money into defeating a second consecutive rent control initiative.

But nowhere was cash clout more evident than in a battle over the tech industry’s employment practices. Homegrown Silicon Valley giants like Uber shattered state spending records by plowing more than $200 million into Proposition 22, which allows them to circumvent a state mandate to convert their independent contractor workers into employees. That massive outlay was enough to surmount unified labor opposition.

“I don’t know if we should be looking at this as progressive versus not progressive or if we should be looking at the overwhelming impact that money has in campaigns,” said Sandra Lowe, a Democratic consultant and former top California Democratic Party strategist. “It’s pretty hard to compete against $200 million of advertisements and most of the people that’s the only thing they know, is what they’re seeing on their television.”

Democratic strategist Michael Trujillo echoed that sentiment, noting that for all of organized labor’s political California clout, “labor’s money isn’t infinite.” Well-funded special interest groups were better able to sway critical Democrats, he said.

“California’s a liberal, Democratic state so if Democrats want to get an initiative passed it’s really on the backs of Democrats,” Trujillo said, and “for the most part, the folks that were able to get their message through in a very expensive state like California tended to do well.”

Some campaigns likely had a harder time breaking through airwave saturation and mailbox inundation of other big-money measures, said Public Policy Institute of California president Mark Baldassare. That may have been the case with affirmative action, which failed despite polls showing widespread support for racial equity measures. Though backers had $31 million, that was a fraction of the money other campaigns had to blitz voters.

“It was a very difficult landscape for other ballot initiatives to get attention and get support for voters,” which often means people default to voting no, Baldassare said. “The connecting of dots in some cases just didn’t take place.”

Still, Republican consultant Rob Stutzman pushed back on the notion that cash mismatches were the sole determining factor in organized labor getting “creamed at the ballot.”

If money exclusively swung elections, Stutzman argued on a post-election panel, “there would be 60 Democratic senators as well,” referring to cash-soaked challenges to GOP senators like Mitch McConnell, John Cornyn and Lindsey Graham, all of whom won.

This article was originally published by Politico on November 12, 2020 Reprinted with permission. 

About the Author: Jeremy B. White co-writes the California Playbook and covers politics in the Golden State. He previously covered the California Legislature for the Sacramento Bee, where he reported on campaigns, myriad nationally significant policy clashes and multiple FBI investigations of sitting lawmakers.

He has a bachelor’s degree in English from Tufts University and a master’s degree in journalism from Columbia University. A native of Bethesda, Maryland, one of his life dreams is to throw out the first pitch at a Washington Nationals game — although he would settle for winning a playoff series. He lives in Oakland with his partner and his cat, Ziggy Pawdust.


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The next blow for businesses: Tax hikes that threaten more layoffs

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Businesses across the nation could soon face state tax increases to pay for the surge in Americans filing for unemployment benefits this year, further straining employers at a time when many are fighting for survival.

Massachusetts, New Jersey and Alabama are among the states looking at tax hikes that could cost employers billions of dollars. It would be a gut punch for businesses struggling because of the pandemic — and some fear it could trigger even more layoffs or prevent new hires.

Governors have been pressing the federal government to come through with more funds, but talks between House Speaker Nancy Pelosi and the White House over a new economic relief package have dragged on for months with no deal in sight, and state aid is one of the major sticking points.

“We’re in a situation where we’re trying to actually get employers to bring people back to work,” said Rachelle Bernstein, vice president and tax counsel at the National Retail Federation. “You certainly don’t want to increase the taxes on employment, which is in essence what’s happening here.”

Both the federal government and states tax the wagesbusinesses pay in order to build up a store of funds in case of mass unemployment. Yet the extraordinary increase in the number of workers filing jobless claims since the pandemic hit in March caught the states by surprise, and the scale of layoffs sparked by the crisis already dwarfs those lost in the Great Recession, which lasted more than twice as long.

As a result, 21 states and the Virgin Islands have already exhausted the money in their accounts that pays for jobless benefits and are tapping into the U.S. Treasury-managed Unemployment Trust Fund for billions of dollars in federal loans to stay afloat. Congress waived interest on these loans in March for all states until the end of the year.

Once a state’s unemployment account dips into the red, it has little choice but to borrow from the Treasury or from private entities, because they are required under federal law to pay unemployment benefits.

Many states will need to cut benefit levels or raise taxes on employers to replenish those funds. The process is fairly routine: 27 states have a tax in place that automatically kicks in when the unemployment fund drops below a certain amount, according to the Tax Foundation. Thirteen of the states that are borrowing from the Treasury have laws on the books that call for an automatic tax hike. They include New York, New Jersey, Illinois, Pennsylvania, Texas and Massachusetts.

“It’s going to take many years for states to pay this back,” said Jared Walczak, vice president of state projects at the right-leaning Tax Foundation. “It’s going to mean higher [unemployment insurance] taxes for a very long time; it’s going to mean all of the costs associated with borrowing will be a fiscal constraint on states for many years to come.”

Glenn Spencer, executive vice president of employment policy at the U.S. Chamber of Commerce, said tax increases are inevitable given that more than 20 states are already borrowing tens of billions of dollars.

“That number is only going to go up,” he said. “So the potential tax burden on businesses across the board is only going to go up.”

In Massachusetts, businesses are staring down a tax hike of nearly 60 percent for 2021.

The state had a healthy balance in its unemployment trust fund in February, but job losses from the pandemic dried it up by July. The state now projects that the unemployment fund will have a nearly $2.5 billion deficit by the end of 2020.

Businesses will have to set aside on average $858 per employee in 2021, compared to $539 now. The costs will continue to rise, albeit at a slower pace, until 2024.

Christopher Carlozzi, the state director of the National Federation of Independent Business, said Massachusetts is hurting the job creators at the worst possible time.

“The state is looking to these small businesses to create jobs, but in the same breath, you’re making it more expensive to create that job,” said Carlozzi, whose group represents small businesses.

In New Jersey, unemployment insurance tax rates for employers could increase on average from 0.7 percent of payroll to 1.1 percent in July 2021. In total, businesses would see a hit of $919 million, according to an analysis by the state’s nonpartisan Office of Legislative Services.

A bill that’s working through the state Legislature would spread out the increase over a few years.

At a September hearing on unemployment issues, the state’s Labor Commissioner, Robert Asaro-Angelo, said what New Jersey really needs is help from the federal government in the form of cash assistance and extending the interest free loans that it’s getting from Treasuryinto next year.

“We are hopeful that there’s going to be relief for trust funds; we’re not the only state requesting this,” he said. “We hope that there will be direct funding for unemployment trust funds because that will ease the burden on employers in New Jersey and across the country.”

New Jersey is not alone. States across the country are seeking a life preserver from Washington with another aid package that could be used to bolster the unemployment trust funds. But President Donald Trump and Republican leaders are balking at giving money to Democratic-governed states like New York, California and Illinois, which they say are mismanaged.

Conservatives also argue that Washington shouldn’t give more money when states haven’t even spent all of the $150 billion that Congress set aside for them in March in the CARES Act to shore up their dwindling trust funds.

“There are a lot of states still sitting on coronavirus relief fund money that they’re allowed to be spending on unemployment compensation benefits right now and are not,” said Walczak of the Tax Foundation. He argues that states have been holding onto the CARES Act funds hoping Congress will pass another aid package that would forgive the loans or provide more flexibility for them to use the money for other priorities.

The New Jersey Business & Industry Association and other business groups have been lobbying for the state to put CARES Act money into the unemployment fund, but to no avail.

“The quicker the fund returns to good health, the more likely it is that the worst of the automatic tax increases can be avoided,” Christopher Emigholz, vice president of government affairs for NJBIA, said in testimony before the Legislature this month.

However, more than three-quarters of state and local governments recently surveyed by the Government Finance Officers Association said they have plans for the money and anticipated spending their share of the aid before the end-of-the-year deadline to use it.

At least a dozen states, including Georgia and Tennessee, used CARES Act funds to replenish their unemployment accounts.

But in some states, the aid wasn’t enough to stave off tax hikes. In Alabama, corporations are still staring at a 200 percent tax increase, even after Republican Gov. Kay Ivey put $300 million in CARES Act dollars into the fund.

Still, this tax rise will be much less severe than it would have been without the money. Alabama’s unemployment insurance tax rate was scheduled to go up from 0.65 percent to 3.95 percent, a more than 500 percent increase. Instead, the rate will increase to 1.95 percent.

“Without this infusion, employers could be facing an unemployment insurance tax increase of more than 500 percent, which could very well force many businesses to close their doors forever, resulting in even more job losses in Alabama,” Alabama Labor Secretary Fitzgerald Washington said in a statement.

On top of the increase in state taxes, businesses could be hit with a tax hike from the federal side as well.

States with dried-up unemployment funds have already borrowed more than $38 billion in interest free loans from the federal government. But the decision to eliminate interest on the loans was a temporary one, and starting next year, states will start accruing interest on what they borrow.

If they haven’t paid back the cash they owe by 2022, businesses in those locations will see a .06 percent increase in their base federal unemployment tax.

In the aftermath of the Great Recession of 2007-2009, 26 of the states and territories that borrowed from the federal government saw their federal unemployment tax go up because they didn’t pay back their loans in time, according to an analysis by the Urban Institute’s Wayne Vroman.

“Many states had debts for multiyear periods, and 11 programs were still making debt repayments in April 2016,” he wrote.

In a letter to congressional leaders earlier this month, the National Association of State Workforce Agencies urged lawmakers to extend the interest moratorium on unemployment insurance trust fund loans through 2021.

“With extreme claim loads, many states are borrowing in order to make UI payments,” the group, which represents unemployment agencies in every state and territory, wrote. “Given the continued economic stress, all state workforce agencies agree that a continued moratorium on interest accrual and payments is critical in order to avoid significant increased taxes and assessments on employers.”

This blog originally appeared at Politico on October 30, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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How A Proposed Pennsylvania Law Would Make Workers Pay Taxes To Their Boss

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According to Good Jobs First, an organization that promotes accountability in economic development, several states allow corporations to literally pocket their employees’ tax payments. Rather than having those taxes go towards public services, the companies withhold money from their workers’ paychecks and just keep it, never remitting it to the state, under the guise of a job creation program.

Good Jobs First found that “nearly $700 million is getting diverted each year. And it is very unlikely that the affected workers are aware, given that no state requires that the diversion be disclosed on pay stubs.” Now, Pennsylvania is considering becoming the latest state to participate, as the Philadelphia City Paper reported:

Republican Governor Tom Corbett is deciding whether or not to sign legislation that would require some workers to pay taxes to their bosses. Yes, you read that right. The bill, which would allow companies that hire at least 250 new workers in the state to keep 95-percent of the workers’ withheld income tax, is an effort to to recruit Oracle to the state.

Your taxes would get withheld by your boss like normal, but they would then keep them and spend it on private jets or monogrammed bathroom fixtures or whatever instead of turning them over to the state–turning your tax dollars over to the state being the whole reason they were ostensibly “withheld” in the first place.

“These deals typify corporate socialism, in which business gains are privatized and costs socialized,” wrote Reuters David Cay Johnson. “Leaders in both parties embrace these giveaways because they draw campaign donations from corporate interests and votes from people who do not understand that they are subsidizing huge companies.” The Pennsylvania Budget and Policy Center listed a host of reasons that Gov. Tom Corbett (R-PA) should reject the law, including its effect on state revenue and its loopholes that will allow companies to collect their workers’ tax payments even if they create no new jobs.

This post originally appeared in ThinkProgress’s Wonk Room on October 24, 2012.  Reprinted with permission.

About the Author: Pat Garofalo is an Economic Policy Editor for ThinkProgress.org at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.


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