Candidates Should Recall Origins of the Tax Revolt

The specter that haunted the Democratic convention was the unspeakable word: taxes . The Republicans in New Orleans made promise after promise not to raise taxes. But can taxation be a winning issue for the Republicans in 1988? It was in 1980, when Ronald Reagan captivated the American middle class with his crusade against high taxes and big government.

California suburbanites had received notice of $1,000 increases in their property-tax bills; they fought back with protests that made Howard Jarvis a legend and Proposition 13 the law. Reagan succeeded because he spoke out against taxes and other middle-class frustrations, projecting them onto the national political arena. Perhaps the history of the California tax revolt is worth re-examining, since those who forget the successes of the past are condemned never to repeat them.

The property-tax revolt began with localized disputes that no politician wanted to deal with, let alone champion. In 1957, thousands of overtaxed homeowners in West Covina packed mass meetings and led a countywide campaign to recall Assessor John Quinn. As property values and assessments began their steep climb, the pace of protest quickened. In 1964, busloads of tax protesters from Alhambra confronted the county Board of Supervisors; two years later, angry taxpayers pledged to strike and not to pay their inflated property-tax bills. Citizens’ committees tried to declare independent new counties in the South Bay, the San Fernando Valley and the Santa Clarita Valley, and fought to break up the taxing machine of greater Los Angeles County.

What motivated homeowners associations, residents groups, block clubs and individual taxpayers was the simple desire to lower their own tax bills and the cost of their housing, so they could pursue the consumerist good life with family and community. Tax protesters were often new to the political game; their first instincts were to shun principled right-wing activists like Howard Jarvis, who led an unsuccessful campaign in 1968 to abolish the property tax entirely. Nor were suburban homeowners particularly enamored of business conservatives who argued for deregulation and tight money. Suburbanites clamored for consumer protection regulations and easy credit. Their passion was spending for consumer goods on the demand side, rather than saving for productive investments on the supply side.

Particularly in blue-collar and lower-middle-class neighborhoods, many protesters initially took an anti-business stance and favored lower taxes for homeowners only, with business paying the bill. This split roll was what the Better Government Assn. of San Gabriel proposed as a ballot initiative back in 1972. Around the same time, Howard Jarvis’ United Organization of Taxpayers was calling for taxing “big oil” and insurance companies to compensate for large cuts in the property tax.

At that moment, liberals in California had a chance to lead the tax revolt. Former Gov. Edmund G. Brown Jr. later tried to claim Proposition 13 as his own and smooth his way to the White House with small-but-beautiful budgets. But Reagan got there first, leading his own anti-tax, free-enterprise crusade. How did suburban homeowners turn themselves into a force for business conservatism? What was the tax revolt, other than homeowners’ self-interest, which only was to use taxes to redistribute riches to the consumer?

The answer is the real secret of the tax revolt--the political innovation of American small business, which together with middle-class consumerism is the heart of the American dream. Although the tax revolt was started by gadflies, it eventually became one of the most powerful political movements the nation had ever seen. The transformation came not from Wall Street but from the Main Streets of California, from shopkeepers on Ventura Boulevard who urged their customers to sign petitions for Proposition 13.

As tax protests spread to affluent suburbs on the Palos Verdes Peninsula and in the Santa Monica Mountains, the tax-reduction movement became a celebration of civic boosterism. Friendly supermarket managers helped petitioners set up tables. Thousands of volunteers gathered more than 1.5 million signatures to place Proposition 13 on the ballot. Real-estate agents added a sales pitch for lower taxes to their contact calls; apartment owners and local real-estate boards sent $500 donations to the campaigns of tax-cutting initiatives. It was a coup for suburban towns and the hinterlands over downtown big government, which had refused to listen to the plight of the little guy.

But it was no revolution of have-nots. Renters, who pay their landlord’s property taxes, got no relief. Even though suburban homeowners had been hit with the steepest rise in property-tax bills, the owners of office buildings, apartments, shopping centers, industrial plants, farms and other businesses received the biggest portion of the property tax reductions. The largest businesses, such as utilities and oil companies, got the largest tax breaks, even though they did not support Proposition 13.

The fusion of middle-class populism, small-business activism and big-business benefits created Proposition 13 and other tax revolts throughout the nation. This is what animated Reagan’s campaigns for the presidency. Can candidate George Bush combine these same constituencies in 1988?

History could repeat. The grievance is there; 1988 state and local taxes now consume as large a portion of personal income as they did in 1980. Small business is organized in an endless array of political-action committees (with such imaginative names as 6-PAC for beer distributors) covering every industry grouping imaginable. The businesses that provide the most votes are not Fortune 550 corporations. They are owners of Chinese restaurants who heard Michael S. Dukakis’ Atlanta ode to ethnic enterprise. They are self-employed auto mechanics who service the aging Chryslers of auto workers. These folks sense that a $5-billion reduction in the capital-gains tax, proposed by Bush, will benefit not themselves but rather Lee A. Iacocca. Bush can only win California and the nation if he keeps quiet about capital gains.

But for now, Bush needs to ignite the fires of economic populism. Campaigns must create history, not re-enact old battles. To gain a lasting advantage, Bush could make a bold promise: to cut the tax rate on the middle, not the upper brackets; this will be good medicine for the 1990 recession. At stake is nothing less than the political soul of the American middle class.