If a local ballot measure gets approved, one of America’s richest cities could generate billions in new tax revenue.
Tech billionaires may have dodged Sen. Elizabeth Warren and her promise to tax their wealth. But now, Warren supporters are taking the fight to the billionaires’ backyard: Silicon Valley. Inspired by Warren’s campaign, activist Kevin Creaven is pursuing a clever, although if legally questionable, strategy to tax the fortunes of billionaires.
Creaven, previously a chemical engineer for San Diego’s county government, moved to Palo Alto last month in order to introduce a ballot proposal to institute a Warren-style wealth tax on anybody who lives in the city. His proposed wealth tax simultaneously capitalizes on California’s permissive rules for ballot initiatives and on the geographic concentration of some of Silicon Valley’s richest. Within those 25 square miles of Palo Alto is a wildly disproportionate amount of America’s most extravagant fortunes: Mark Zuckerberg’s $85 billion, Larry Page’s $65 billion, and Laurene Powell Jobs’s $25 billion, to name a few.
Creaven sought out the California city that had the right mix of liberal-enough politics, easy ballot access, and plenty of billionaires. To him, that packed geography is a vulnerability for the country’s billionaire class. And if Warren isn’t going to be president, his ballot proposal is a pretty workable backup plan to a national policy.
“When you see that 66 percent of people support any issue and you live in a direct democracy, I think someone should take charge and get that done. I don’t think we should live as if we’re under some tyranny,” Creaven said. “I just don’t see a viable way to get this done federally.”
Creaven’s proposal, like Warren’s, would assess a 2 percent tax on every dollar over $50 million in net worth and a 3 percent tax on every dollar over $1 billion. Creaven says the latter rate alone could lead to over $10 billion a year in tax revenue. (He admits that figure comes from a crude analysis he conducted by examining the reported net worths of the dozen or so Palo Alto residents on the Forbes 400 list.) Tossing in a dash of entrepreneur Andrew Yang’s ideas, Creaven also wants to send a $2,500 check to every resident of Palo Alto in the first year of the new tax.
Creaven, who is 29, was never involved in politics until he was inspired enough by Warren to donate to her campaign. He started a new political group, Breathe Free America, that is also sponsoring a push for electric cars in Palo Alto in a separate referendum that he is personally funding. Creaven is paying for four other organizers who have begun helping him collect signatures at grocery stores outside Palo Alto supermarkets like Safeway and Trader Joe’s.
The wealth tax effort, for one, represents the most brazen attempt yet by an interloper to parachute into Bay Area politics to make a broader, national point about tech fortunes. It also shows how, despite Warren’s limited success in the Democratic primary, her idea for a wealth tax has leaped well into the mainstream and ignited a new wave of aggressive activism.
The proposed wealth tax in Palo Alto would have to clear several bars before Zuckerberg or the other mega-billionaires should start clutching their dollars closer. Creaven needs to secure about 2,300 signatures for his initiative to qualify for the November ballot, a relatively low threshold that he feels confident he’ll meet. But then there is the question of whether it could actually clear the two-thirds supermajority it would need to pass — a steep climb in the high-income, fiscally conservative city of 65,000.
Then come the legal challenges, which are not uncommon in the aftermath of ballot initiatives but seem practically inevitable here given concerns about its constitutionality in California. For example, no California cities have their own income taxes, because they are “preempted” by California’s state income tax regime. David A. Carrillo, executive director of UC Berkeley’s California Constitution Center, said it’s possible the courts might take some unusual steps in this case.
“California courts are usually reluctant to prevent measures from going on the ballot, but this may be the rare measure that’s too legally suspect to go to the voters,” Carrillo said. “And getting it on the ballot might be self-defeating,” he added, because it could “doom future attempts to tax the wealthy.”
Creaven said he had not consulted a lawyer on the measure, which he wrote himself, but argued that a wealth tax was more similar to a local property tax than a city income tax.
Wealth taxes, previously a fringe idea, proved to be one of the breakout hits of the Democratic primary, surprisingly popular with not just liberals but a majority of Republicans as well. Yet Nancy Shepherd, a former mayor of Palo Alto, said that she felt the relative popularity of the idea was an insufficient rationale in a city with a median household income of $137,000. As such, Shepherd thinks the wealth tax proposal would be unlikely to pass in Palo Alto, though it might fare differently in the neighboring city of Menlo Park, where about 10 percent of residents live in poverty.
“People in Palo Alto don’t mind people making money,” she said. “I’m not sure that this has the urgency to solve a problem. Initiatives should be solving a problem.”
There are also bound to be concerns about the enforceability of a wealth tax that’s imposed in just one city. Mark Zuckerberg technically lives — or, in legalese, domiciles — in Palo Alto. But if he’s facing a billion-dollar tax bill in Palo Alto, he might move his domicile to San Francisco or Lake Tahoe, where he also owns homes. Powell Jobs has two other homes just in Silicon Valley. Creaven’s proposal tries to solve this with two ideas: an “exit tax” for any billionaires who exit Palo Alto, and making evasion a crime. That, like the constitutionality of the proposal, also troubles some legal scholars.
The idea of a more local version of a wealth tax has made some progress elsewhere in the country. Seattle, Washington, instated a 2.25 percent tax on certain households in 2017, though that measure has since been ruled unconstitutional by the courts. Burlington, Vermont, is considering a wealth tax of its own, though those proceedings have been postponed due to the coronavirus pandemic.
But Creaven sees all of these taxes on tech billionaires as merely a good enough alternative for what he really wants: regulation of their business practices.
“[Tech billionaires] might not be paying taxes through regulation the way that other industries are,” Creaven said. “They have a blank check to do whatever they want. And I think we’re seeing right now the immense amount of damage that’s being done by the tech industry. And we can’t really regulate them.”
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Author: Theodore Schleifer
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