The tax counterrevolution is on the brink of a triumph here that will be portrayed nationally as proof that the public does not want its taxes cut after all, but it in fact will prove the tenacious grasp of the governing class on the money flow.
All polls and nearly all politicians agree that sentiment has been rising steadily against Proposition 9, which would cut in half state income tax rates; its defeat in the June 3 election is widely expected. How is this possible in California, home of the tax revolution, just when ordinary Americans need every last dollar in their wallets?
The answer is that the governing class -- politicians, administrators, educators, public employee unions -- have made their point to the taxpayer: if you cut our tax sources, we will cut your vital services. Whether or not taxpayers consider such cuts necessary in the face of rising government revenue, they consider them highly probable.
The tax counterrevolution's fear campaign might be countered by insistently repeated arguments that California's tax system is a money machine continuing to generate revenue even as rates are cut. But strangely, there is almost no media campaign for Proposition 9. The most visible effort is increasingly eccentric and ineffective campaigning by 77-year-old tax-cut crusader Howard Jarvis.
Defeat of Proposition 9 Tuesday will be interpreted nationally as a dying tax revolt, not only by the governing class but by conventional Republicans uneasy about Ronald Reagan's embrace of Kemp-Roth federal tax reduction. Although Reagan personally will vote for Proposition 9, senior aides suggest he should back away from tax reduction. "I think this issue is losing its steam," one key Reagan adviser told us.
None of this seemed possible scarcely two months ago. Proposition 13, cutting property taxes, had passed overwhelmingly in 1978 under Jarvis' leadership; Proposition 9 was running well ahead in the polls.
What's more, evidence pointed to confirmation of economist Arthur Laffer's theory that tax rate reduction does not seriously deplete revenues but maintains them through higher business activity. Despite depletion because of the Proposition 13 property tax cuts, the state government surplus is now conservatively estimated at $2.5 billion. Indeed, the California money machine no later than 1982 will boost property tax receipts above their pre-Proposition 13 level.
Nevertheless, the California tax cuts pose a threat to the governing class by diminishing the share of the economy dedicated to government. The result has been the counterattack nationally by public employee unions, which have poured $1 billion in contributions into fighting Proposition 9.
The resulting television campaign has avoided Chicken Little scare tactics that backfired in the 1978 fight. The major argument has been that since the income tax rates are cut evenly across the board, the rich will benefit disproportionately. But polls indicate this reversion to class warfare has had little effect.
What has been effective were privately circulated threats by educators at all levels. David S. Saxon, president of the University of California, wrote a letter to students threatening that passage of Proposition 9 would result in higher student fees and severely reduce programs. Simultaneously, schoolchildren throughout the state brought home similar notes warning of diminished educational quality if their parents voted to cut taxes.
According to public opinion analysis, the average Californian has reached this conclusion: there are plenty of wasteful government projects that could be cut, but vengeful administrators instead will slash away at schools, police and fire protection.
In contrast, big business is uninterested in personal tax reduction. "Our friends in the lobby aren't for this and neither am I," one conservative state senator confided. The result: an empty war chest. Proponents of Proposition 9 are nearly mute, with only $100,000 spent on television compared with nearly $700,000 by its foes. A pro-tax-cut commercial by Mayor Pete Wilson of San Diego is seldom seen, and one cut by Laffer never got on the air. The campaign consists mainly of occasionally profane, often intemperate harangues by Jarvis.
That is not enough to counter popular fear of the governing class striking back. Future tax-cutting efforts will require a campaign far more vigorous than the passive effort here -- and perhaps something more: attempts to sell the public on Laffer's theory that cuts in tax rates will not drastically reduce revenue, thereby rendering indefensible the threats of the governing class.