This month’s election results in California brought a rare and welcome hint of climate change – business climate change, that is.
The Golden State has lost a lot of its luster in the 21st century. Raging wildfires and repeated, prolonged power cuts give the place an apocalyptic feel. Rising taxes, stifling regulation, unaffordable housing and miserable commutes make daily life a challenge for millions. For practical purposes, the state Legislature is run by unions, for unions – notably those in the public sector. This creates a widening gulf between, on the one hand, constituents for whom taxes are a source of income and the politicians who depend on their cash and organization, and, on the other, the private sector that bears most of the economic burden.
But on Nov. 3, in the highest turnout election on record, Californians collectively said “enough is enough.” With a slew of legislative initiatives and constitutional amendments on the ballot, voters reminded lawmakers that “public service” means service to the public, not service by the public.
This is not to say that deep-blue California has suddenly acquired the political complexion of Texas or Florida. It has not, and it will not, at least for the foreseeable future. President Donald Trump carried the latter two states; California voted for Joe Biden by nearly a two-to-one margin.
When it came to the initiatives on California’s ballots, national attention focused mainly on Proposition 22. This initiative was an effort to overturn recent legislation and allow app-based drivers for Uber, Lyft, DoorDash and similar services to continue working as independent contractors. These companies had threatened to severely curtail their activities in the state after the Legislature passed new law targeting them (along with other businesses, but with numerous carve-outs) in 2019. But first they pledged huge sums for the ballot initiative to carve out an exception for themselves. Uber and DoorDash each ended up contributing more than $50 million; Lyft contributed almost that much. The parent companies of Instacart and Postmates contributed $31 million and $11.5 million, respectively. The five companies together gave millions more in in-kind goods and services.
Proposition 22 passed with about 58% of the vote, despite opposition from an array of Democrats including Biden and his running mate, California Sen. Kamala Harris. Opponents of the measure raised about $19 million, with most of the largest donations coming from labor unions.
But Proposition 22 was not a one-off. It was evidently not the artificial result of a deluge of business spending, either. The fight over Proposition 21, which would have expanded localities’ abilities to impose rent control, was somewhat more even, though still tilted toward the business community. Opponents, funded largely by real estate interests, raised some $73 million. Supporters from labor and progressive groups allied with Democrats put up $40 million. But the proposition only gathered 40% of the vote. There was division in the labor ranks, with construction trade unions opposing the measure, while public and service sector groups supported it.
It was a closer fight on Proposition 15, which would have amended the state constitution to raise taxes on commercial and industrial property. Supporters – including public employee unions, along with the private sector Service Employees International Union – slightly outraised opponents, a coalition of business and real estate groups. Each side gathered over $60 million. The amendment failed, 48% to 52%.
A grudge match between the SEIU and companies operating private kidney dialysis centers resulted in a landslide loss for the union. Californians overwhelmingly rejected a requirement that centers have a licensed doctor on site at all times when treating patients, whose routine care is usually provided by nonphysician technicians. The union, which has been fighting to organize workers at these centers, lost a related ballot measure in 2018.
Organized labor’s only tax policy victory came with Proposition 19. This was a cleverly crafted measure that tied property tax increases on inherited homes – except those used by the heirs as a primary residence – to increased funding for firefighters, whose heroism in keeping incendiary wildlands at bay is universally appreciated. Even with this packaging, which used the firefighters as a sort of loss leader to bring in more money for counties and school districts, the vote was a narrow 51% to 49% in favor. The measure got a boost from real estate agents, who stand to profit when heirs sell inherited homes, rather than paying higher taxes to hold them. Their industry pitched in more than $40 million, well over three-quarters of the money raised by the measure’s supporters.
Beyond pocketbook questions, Californians made their measured voices heard on an assortment of social justice and quality of life issues. In several cases, they found themselves at odds with the solons of Sacramento.
A measure to restore voting rights to convicted felons who were released on parole passed easily, with 59% of the vote. But an effort to remove the state Constitution’s ban on race- or gender-based affirmative action failed, despite backers outspending opponents by nearly 19 to 1. It is noteworthy that in an election year when racial justice was high on the agenda, Californians seemed to adopt the view of Supreme Court Chief Justice John Roberts that “the way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” This does not mean Californians oppose affirmative action that is not explicitly race-based, even if its impacts tend to skew toward disadvantaged racial minorities.
A Legislature-passed measure to end cash bail and replace it with a convoluted system of pretrial risk assessment for each defendant was soundly vetoed by 56% of the electorate, despite near-unanimous support from elected Democrats and newspaper editorial pages. The opposition was a peculiar combination – they would not have called themselves a coalition – of bail bond companies and civil liberties groups that feared the pretrial assessments would be even more burdensome for accused suspects than existing bail procedures. There seemed to be broad consensus that some sort of reform is needed, but not the one the Legislature crafted.
Voters also defeated a proposal to let 17-year-olds vote in primary and special elections if they will turn 18 before the next general election. Even without any organized opposition, the idea was rejected by about 56% of the eligible adults. These voters apparently concluded that ballots, like cigarettes, do not belong in the hands of children.
For those of us inside and outside California who watch with concern as the nation’s most important state seems to systematically undermine itself, it is a relief to see citizens there drawing lines in more sensible places than their elected officials are prone to put them.
Of course, it’s still California. Another ballot measure expanding on consumer privacy rights proposed to remove a 30-day window for businesses to cure any violations before being fined. This one, Proposition 24, passed with 56% of the vote.
You can’t win them all. Some states treat businesses like horses that can be encouraged with carrots to take them where they want to go. Others, California notably among them, instinctively reach for the stick. For now, we have to settle for the comparative comfort of a smaller stick.
Posted by Larry M. Elkin, CPA, CFP®
photo by Sharon Hahn Darlin, licensed under CC BY
This month’s election results in California brought a rare and welcome hint of climate change – business climate change, that is.
The Golden State has lost a lot of its luster in the 21st century. Raging wildfires and repeated, prolonged power cuts give the place an apocalyptic feel. Rising taxes, stifling regulation, unaffordable housing and miserable commutes make daily life a challenge for millions. For practical purposes, the state Legislature is run by unions, for unions – notably those in the public sector. This creates a widening gulf between, on the one hand, constituents for whom taxes are a source of income and the politicians who depend on their cash and organization, and, on the other, the private sector that bears most of the economic burden.
But on Nov. 3, in the highest turnout election on record, Californians collectively said “enough is enough.” With a slew of legislative initiatives and constitutional amendments on the ballot, voters reminded lawmakers that “public service” means service to the public, not service by the public.
This is not to say that deep-blue California has suddenly acquired the political complexion of Texas or Florida. It has not, and it will not, at least for the foreseeable future. President Donald Trump carried the latter two states; California voted for Joe Biden by nearly a two-to-one margin.
When it came to the initiatives on California’s ballots, national attention focused mainly on Proposition 22. This initiative was an effort to overturn recent legislation and allow app-based drivers for Uber, Lyft, DoorDash and similar services to continue working as independent contractors. These companies had threatened to severely curtail their activities in the state after the Legislature passed new law targeting them (along with other businesses, but with numerous carve-outs) in 2019. But first they pledged huge sums for the ballot initiative to carve out an exception for themselves. Uber and DoorDash each ended up contributing more than $50 million; Lyft contributed almost that much. The parent companies of Instacart and Postmates contributed $31 million and $11.5 million, respectively. The five companies together gave millions more in in-kind goods and services.
Proposition 22 passed with about 58% of the vote, despite opposition from an array of Democrats including Biden and his running mate, California Sen. Kamala Harris. Opponents of the measure raised about $19 million, with most of the largest donations coming from labor unions.
But Proposition 22 was not a one-off. It was evidently not the artificial result of a deluge of business spending, either. The fight over Proposition 21, which would have expanded localities’ abilities to impose rent control, was somewhat more even, though still tilted toward the business community. Opponents, funded largely by real estate interests, raised some $73 million. Supporters from labor and progressive groups allied with Democrats put up $40 million. But the proposition only gathered 40% of the vote. There was division in the labor ranks, with construction trade unions opposing the measure, while public and service sector groups supported it.
It was a closer fight on Proposition 15, which would have amended the state constitution to raise taxes on commercial and industrial property. Supporters – including public employee unions, along with the private sector Service Employees International Union – slightly outraised opponents, a coalition of business and real estate groups. Each side gathered over $60 million. The amendment failed, 48% to 52%.
A grudge match between the SEIU and companies operating private kidney dialysis centers resulted in a landslide loss for the union. Californians overwhelmingly rejected a requirement that centers have a licensed doctor on site at all times when treating patients, whose routine care is usually provided by nonphysician technicians. The union, which has been fighting to organize workers at these centers, lost a related ballot measure in 2018.
Organized labor’s only tax policy victory came with Proposition 19. This was a cleverly crafted measure that tied property tax increases on inherited homes – except those used by the heirs as a primary residence – to increased funding for firefighters, whose heroism in keeping incendiary wildlands at bay is universally appreciated. Even with this packaging, which used the firefighters as a sort of loss leader to bring in more money for counties and school districts, the vote was a narrow 51% to 49% in favor. The measure got a boost from real estate agents, who stand to profit when heirs sell inherited homes, rather than paying higher taxes to hold them. Their industry pitched in more than $40 million, well over three-quarters of the money raised by the measure’s supporters.
Beyond pocketbook questions, Californians made their measured voices heard on an assortment of social justice and quality of life issues. In several cases, they found themselves at odds with the solons of Sacramento.
A measure to restore voting rights to convicted felons who were released on parole passed easily, with 59% of the vote. But an effort to remove the state Constitution’s ban on race- or gender-based affirmative action failed, despite backers outspending opponents by nearly 19 to 1. It is noteworthy that in an election year when racial justice was high on the agenda, Californians seemed to adopt the view of Supreme Court Chief Justice John Roberts that “the way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” This does not mean Californians oppose affirmative action that is not explicitly race-based, even if its impacts tend to skew toward disadvantaged racial minorities.
A Legislature-passed measure to end cash bail and replace it with a convoluted system of pretrial risk assessment for each defendant was soundly vetoed by 56% of the electorate, despite near-unanimous support from elected Democrats and newspaper editorial pages. The opposition was a peculiar combination – they would not have called themselves a coalition – of bail bond companies and civil liberties groups that feared the pretrial assessments would be even more burdensome for accused suspects than existing bail procedures. There seemed to be broad consensus that some sort of reform is needed, but not the one the Legislature crafted.
Voters also defeated a proposal to let 17-year-olds vote in primary and special elections if they will turn 18 before the next general election. Even without any organized opposition, the idea was rejected by about 56% of the eligible adults. These voters apparently concluded that ballots, like cigarettes, do not belong in the hands of children.
For those of us inside and outside California who watch with concern as the nation’s most important state seems to systematically undermine itself, it is a relief to see citizens there drawing lines in more sensible places than their elected officials are prone to put them.
Of course, it’s still California. Another ballot measure expanding on consumer privacy rights proposed to remove a 30-day window for businesses to cure any violations before being fined. This one, Proposition 24, passed with 56% of the vote.
You can’t win them all. Some states treat businesses like horses that can be encouraged with carrots to take them where they want to go. Others, California notably among them, instinctively reach for the stick. For now, we have to settle for the comparative comfort of a smaller stick.
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