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Lady Godiva and the Fight for Taxation to Benefit the Middle and Working Class

The state capitol was far from the White Plains

The state capitol was far from the White Plains, New York, church basement on a recent evening in May, but the 30 or so citizens gathered felt its dysfunction and talked about how to fix it. “I thought, it’s not acceptable – as property taxes go up, income taxes go down,” said Rachel Estroff, a slight, 39-year-old mom of two small children who helps lead Westchester for Change and called the meeting.

Every time the state cuts money going to towns and counties, localities hike property taxes, socking homeowners and renters even harder. In the five years between 2000 and 2005 alone, local property taxes for schools and other uses went up more the 30 percent in the state. And that was during the good times. Now, like other states, New York is struggling to plug a $9 billion hole in its budget, ripped open by the drop in tax revenues as people spend and earn less during the Great Recession even as needs grow. The state legislature in Albany missed its April 1 budget deadline. With more than half of the state budget going toward education and health, any cuts are sure to cause a spike in local property taxes that support schools.

Throughout the state, interested citizens watch the proceedings like it’s a slow-motion car wreck. Westchester for Change, which began as a network of Obama campaigners, is shaking free of the stupor and trying to figure out what to do. The group, with a mailing list of 700, retooled itself after the election to support health care reform and, now perhaps, tax reform. The mix of battered Fords and gleaming Volvos in the church parking lot reveals the complex class makeup of the county, which, despite its country club reputation, includes the very rich, the middle class – both the secure and the struggling – and the poor.

A dun-colored, third generation resident of White Plains, the county seat, confided that the property taxes on her small two-bedroom house have tripled since 1997. The city’s main street businesses aren’t generating sales taxes like they used to, so the municipality turns to other sources of revenue.

“Property taxes are crazy, they’re not based on income, they’re not democratic,” said Gioia Shebar, a retired teacher and force of nature from Ulster County, whose five-year-old citizen’s group has been pushing Albany to get its act together before another New Yorker of modest means is forced to sell her home in the face of skyrocketing tax rates. She came down to introduce the Westchester County residents to the statewide organizing, along with Ron Deutsch of the coalition New Yorkers for Fiscal Fairness and a farmer from up the Hudson, Robert McKeon, who leads Tax Reform Effort of Northern Dutchess (TREND). Like McKeon, Shebar made her mark as an environmental activist fighting for open space before taking on property taxes.

They are part of a growing trend in progressive organizing nationally: tax activism. But unlike the right-wing Tea Partiers, these tax activists can’t tap the deep pockets of the Koch family fortune to pay for state level organizers as does Americans for Prosperity, one of the national right-wing groups giving the Tea Partiers some backbone. Deutsch was the only one among the group visiting the Westchester activists who is paid to talk about taxes, and he also has to serve as a lobbyist and policy wonk operating out of the state Capitol. Progressives are quite simply outgunned in the fight for the hearts and minds of middle and working class when it comes to taxes.

Shebar’s group launched itself by sending a corrections officer dressed in a flesh-colored body suit and long, blond wig to ride through towns on a white horse like Lady Godiva to win attention and signatures on a petition. “You don’t need to do all this stuff, you just need to join us,” she told the Westchester crowd. “We’re all in this together.”

“We almost didn’t come here tonight because the flyer said ‘easing the tax burden.’ We thought it was a tea party thing,” said a wiry 40-something-year-old with thick, black glasses.

“We have a man in my town, he’s part of the tea party and he’s on my coordinating committee. We’re not getting trouble from them,” said Shebar, a solid-looking woman, who set off her pure white hair with scarlet lipstick and an electric green shirt. Her group and McKeon’s are members of the Omnibus tax Consortium led by Deutsch and New Yorkers for Fiscal Fairness, which includes unions and progressive advocacy groups, but also some more conservative property tax groups. Even the conservatives seem to like the idea of rebating New Yorkers’ property tax payments (even those paid through rent) based on their income, paid for in part by a tax hike on Wall Street bonuses. That’s the so-called “Omnibus bill.”

The conservatives (and New York State gubernatorial candidate Andrew Cuomo) also tend to support a property tax cap, that Shebar, McKeon and Deutsch say won’t work. A large chunk of the meeting was McKeon showing the lessons of the tax cap passed in Massachusetts in 1980, where wealthy communities vote to override the cap to raise as much revenue as they need, while poor communities are stuck. In Colorado, the property tax cap was eventually repealed with the support of a coalition of state businesses. The tax cap is a live proposal in New York coming out of a state Property Tax Relief Commission led by a Democrat, but also championed by Republican Gov. Chris Christie of neighboring New Jersey and conservative tax activists nationwide. It feeds into the “starve the beast” philosophy of conservatives to shrink government services by cutting revenue.

Instead, property tax relief should come by making the system more progressive and restoring taxes on the highest incomes, those best able to pay, according to the threesome. In the consortium’s rebate scheme, the state calculates whether a family’s property taxes exceed a set amount determined by their income and sends the check to the individual taxpayers after they’ve paid their school and other local property taxes; this way schools and localities receive their full payment, while adding a progressive element to the property tax system by limiting how much the family pays depending on their income. This kind of so-called “circuit breaker” has been in place in the state since 1978, but now kicks in only for those making under $18,000. The consortium’s proposal would phase in relief until it would cover even those making up to $250,000, and go beyond the school tax circuit breaker the governor seems to support.

That’s short term.

“We need to look at a permanent income tax structure that has those who can afford it pay more,” said Deutsch, who came down from Albany armed with graphs and a PowerPoint presentation. Right now the state’s top tax rate is 6.85 percent on those making more than $40,000. Thirty years ago, New York had a top tax rate for the wealthiest of 15.375 percent. Last year, the New Yorkers for Fiscal Fairness led a coalition that successfully pushed for adding two higher tax rates on those making over $300,000 and $500,000 to get through the budget crunch, but they expire in 2011. Last year, New York was one of only five states nationally that used a tax hike on the wealthiest to get out of its budget mess.

Even with the temporary hike, the rich aren’t feeling too much pain given the Reagan inspired tax shifts of recent years that claimed cutting taxes on the wealthy will unleash their investment in the economy – as opposed to fueling the speculation and the financialization of the economy that we have seen. In the process, the wealthiest managed to emerge from decades of income tax cuts and property tax hikes with the lowest real tax rates in the state. The top 1 percent of New Yorkers pay 7.2 percent of their income in taxes (9.4 percent with the temporary tax hike), while the middle income New Yorkers pay about 11 percent. This is the story in state after state, as revealed by Citizens for Tax Justice’s Institute on Taxation and Economic Policy.

It is a crisis that isn’t getting attention, but not for want of trying. “All the little tax groups got together and we went to Ron and Frank Mauro [of New York’s Fiscal Policy Institute], the biggest brain in the state, and they wrote a solution, the Ominibus bill,” said Shebar.

“We have resources. We’re one of the wealthiest states in the nation. It’s how we use the resources,” said Deutsch.

Activated voters upstate seem to be listening, but Liz Krueger in the New York State Senate and Steven Englebright in the Assembly haven’t yet convinced their colleagues, at least not in the numbers needed. In other states, progressive tax movements are starting to win some victories, despite the headlines going to the Tea Party crowd. Most famously in Oregon, voters in January permanently hiked taxes on big companies and income taxes on families making over $250,000 rather than cut schools and services to help plug a $4 billion hole in the state budget. Even rural counties that never supported a tax hike before backed this tax-the-richest scheme. That success was led by unions, but was only possible because the legislature originally passing the tax hike had recently turned Democratic.

In Alabama, which Citizens for Tax Justice ranks as one of the ten worst states overburdening the poor with taxes, a largely faith-based coalition called Arise is seeking to raise taxes on the wealthiest in order to repeal an onerous 4 percent grocery tax that hits poor families hard. In 2006, Arise won a great victory after a long struggle when the state raised the threshold for when it begins taxing income, from a shocking $4,600 a year to (a still-shocking) $12,600. But lower-middle income Alabamians still pay 10.5 percent of their incomes in state and local taxes, while the top one percent pay 4 percent of their incomes in state and local taxes, less than half the share of the middle class.

Arise and Deutsch’s group New Yorkers for Fiscal Fairness are both part of United for a Fair Economy’s nationwide coalition of groups, some faith based, others a mix of unions and advocates, trying to make their state tax systems less burdensome on lower- and middle-income people. Progressive taxes that rely more on those with the ability to pay were once considered common sense in the years before the Reagan Revolution, and these organizers are trying to make it common sense again.

But while Arise takes on people’s skepticism of government directly – its director Kimble Forrister starts community meetings by asking people how they benefit from taxes and finds many people cannot even provide an answer – the Omnibus Consortium is sidestepping that strategy to enlarge their coalition and include more conservative groups. And unlike in Oregon, having a Democratic governor and legislature in New York isn’t making it an easier to secure a tax hike on Wall Street mega-millionaires.

The Omnibus property tax plan is shear “craziness,” according to New York Mayor Michael Bloomberg.

“They say, we can’t tax Wall Street, they’ll go. Well where are they going to go? If you want to know, that’s probably what’s holding up the budget,” said Shebar.

“If you say you’re not going to raise taxes on the wealthy, average New Yorkers are going to pay,” said McKeon.

It’s not clear this populist ground game has generated the power it needs to move politics. The consortium lacks a dedicated organizer, and these types of meetings with new allies are rare. But the New York model, linking property tax relief to progressive taxation, has legs and potentially offers a potent grassroots alternative to Tea Party politics. Majorities nationwide support raising taxes on the wealthy, despite vigorous campaigns by the Right – including the conservative Christian Family Research Council – who argue against the progressive income tax and other tax systems that demand more from those who can afford it. Investing in a liberal Tea Party politics that takes on the wealthiests’ stranglehold on both parties is a no brainer whose time has come.