Squeezing Ordinary Citizens from NY to California

Following World War II, the United States produced something the world had never seen: a mass middle class. For the first time, a majority of a major nation's people had real money left over after paying for basic food and shelter.

New York and California served as geographic bookends to this colossal achievement. They offered ordinary citizens lives unimaginable only a few short years before. Activist government policies made those lives possible. Government-subsidized loans raised new middle-class suburbs from potato fields and sugar beet acres. Tax dollars funded new roads, schools, and parks.

"California's children, swarming on all those new playgrounds, seemed healthier, happier, taller," as Atlantic editor Benjamin Schwarz has noted. "A sweet, vivacious time."

That time may be gone for good. The new governors of New York and California, both Democrats, have essentially declared America's mass middle class ancient history.

Andrew Cuomo in New York and Jerry Brown in California are pushing a fundamental "realignment" that goes beyond the budget cutbacks that have become a grim annual routine in state capitals.

Brown and Cuomo are attacking the foundational core of America's middle class: the notion that public policies can improve ordinary people's lives. Instead, they're squeezing public employees and the public goods and services they provide.

Consider what's happened to higher education in California. Fifty years ago, every California high school grad had access to free community college. High-achievers paid rock-bottom rates to attend some of the world's finest universities. Today, under Jerry Brown's new fiscal game plan, revenue from student fees will exceed the state government's contribution to higher education for the first time in California history.

Brown says he has no alternative.

"This is the world we live in," Brown has pronounced. "You can't manufacture money."

But governments can raise revenue by taxing their most affluent. Back in America's middle class golden age, that's what happened.

Brown refuses to go down that road. The temporary California tax hikes that he wants to preserve--a 1 percent boost in state sales tax, a 0.25 percent increase across the board on the state income tax, among others--all fall heavier on middle-income Californians.

In New York, Andrew Cuomo isn't willing to raise taxes on the rich at all. His rationale for that refusal?

"The working families of New York," Cuomo says, "cannot afford tax increases."

Cuomo defines "working families" to include the wealthy. "They work, too," he explains. Indeed they do. But under current law New York's wealthy actually spend less of their income in state and local taxes than ordinary New Yorkers.

New Yorkers making between $33,000 and $95,000, analysts Chloe Tribich, Sunshine Ludder, and Ron Deutsch recently pointed out, pay 11 percent of their incomes in state and local tax. New York's richest 1 percent--taxpayers making over $633,000--only pay 7 percent.

In the middle class's heyday, New York's wealthy faced a far heavier tax burden. In fact, since 1980, the top state tax rate on New York's highest incomes has dropped by half.

So has the top federal tax rate, from 70 to 35 percent.

New York and California alone have more taxpayers making over $200,000 than all 22 states that John McCain carried in the 2008 Presidential election combined, according to David Callahan, a senior fellow at the think tank Demos.

Without the recent tax deal Obama brokered with the GOP, Callahan notes, these affluent would be paying federal taxes, this year and next, at a 39.6 percent top rate. So why not, he asks, raise top state income tax rates--from 10.5 to 15 percent in California and from 8.97 percent to 13.5 percent in New York--to take back what the rich are saving at the federal level?

Don't hold your breath. Neither Brown nor Cuomo sees any reason to inconvenience the financially fortunate. We're just "going to have to reduce government spending," Cuomo insists.

For the awesomely affluent, that makes sense. Rich people, after all, don't require public schools and parks and libraries. They feel they don't need government spending. Only the little people do.