IN THE FIRST 100 pages of Revolt of the Haves, Robert Kuttner tells the entertaining tale of the passage of Proposition 13, the California initiative that cut the state's property taxes by $6 billion. In the next 250 pages, however, he tells readers a lot more than they'd ever want to know about taxes -- in Michigan, Idaho and other arcane points of the compass.
Kuttner's problem is that he has to go far afield to prove a thesis that's probably impossible to prove: That the California tax revolt was not a right-wing protest against high government spending, but a left-wing protest against an unfair tax system -- one that put a heavy burden on homeowners and a light one on business.
There is no doubt about the facts in the case: Two years ago, California voters passed Proposition 13 in a landslide. The next year, 22 states cut property taxes, 15 cut sales taxes, and 12 repealed or reduced other taxes. Both Jimmy Carter and Ronald Reagan promised to cut fedeal taxes. Tax cut fever is epidemic in the land.
But what does it mean? Kuttner argues "that the taxpayer revolt of the late 1970s was not primarily a protest against the rising cost and size of government." The level of taxation as a percentage of output didn't change during the '70s, he claims. "Rather, the tax revolt was a quite valid reaction against inequities in the tax systems, exacerbated by broader economic distress."
In other words, property-owners in California weren't revolting against too much taxing and spending in general, but against too much taxing on them in particular. And, even though Kuttner calls his book Revolt of the Haves, he says that the shock troops of the revolution were moderate-income homeowners, the values of whose houses were pushed up enormously by inflation. (He points out that Proposition 13 had more support among voters with incomes between $8,000 and $25,000 than among those with incomes over $25,000.) In 1966, for instance, a Los Angeles home was assessed at $22,800 and the owner paid a tax of $535; by 1975, the same house was valued at $54,700 and the tax was $1,800; in 1978, the assessment was $90,800 and the tax $3,130.
Kuttner's contention is that homeowners presumably wouldn't mind their taxes soaring if everyone else's taxes soared as much. But, he says, during the '70s California taxes were made relatively lighter for business: of the total tax bill, homeowners bore "34 percent in 1974-75 . . . nearly 45 percent by the time of the vote on Proposition 13." Thus, the revolt against the unfair system.
The problem with this thesis is that Proposition 13 actually lowered business taxes more than it lowered homeowner taxes: "The biggest windfall of all went to corporate property owners. . . . Pacific Telephone and Telegraph saved $130 million in property taxes; Pacific Gas and Electric, $91 million; Southern Pacific Railroad, $12 million."
Whether this felicitous result for the barons of industry was by design or dumb luck, Kuttner doesn't say. He does say that the rich lode of tax protest was mined by conservatives, led by a truly loony but endearing right-winger, Howard Jarvis, "a homey, unpretentious figure, combining the folk wisdom of a Grandpa Walton and the universal orneriness of a W. C. Fields." But Kuttner believes that the lode could just as easily have been worked by liberals, and he cites the success of a left-wing anti-tax organization in Massachusetts, Fair Share, led by Michael Ansara, "a veteran of the early Students for a Democratic Society, who took seriously the S.D.S. gospel to go out and build grass-roots advocacy organizations in blue-collar communities."
This book is more than revisionist economic history. It is a call to arms for liberals to lead the tax revolt. "Today, you can't put together a majority coalition around the idea that inequities should be addressed by bigger and more costly federal programs. But neither will cutbacks in social programs solve the inequities of the tax system." Kuttner's answer: Hold the line on social programs and change the tax system so that rich people and corporations pay more, and everyone else less.
This is an answer with which I don't happen to agree, but Kuttner, a former Washington Post reporter and Senate Banking Committee investigator who now edits the magazine Working Papers, presents his case lucidly (though at too great a length). At a time when new thinking in tax policy is dominated by articulate conservatives like Irving Kristol and Jude Wanniski, it's good to have solid representation from the other side.
By contrast, Robert C. Yeager's brief, glib book, Losing It, makes almost no case at all -- except that the middle class is being hurt by inflation. "Ken Osgrove makes $30,000 a year but never has any money," writes Yeager. So what else is new?
Yeager is at great pains to describe what is going on -- how much theater tickets cost today vs. 10 years ago, how to define "middle class," etc. Like Kuttner, he dwells on the tax rebellion, but he calls it "a revolt of the right and middle-right against big government." There's a second revolt, too: "of the left and middle-left against corporations."
Yeager parades his clip file but adds little to our understanding of why the middle class is beleaguered or how America could survive without the bourgeoisie.