California’s billionaire tax is dividing Democrats

Meaning:Populist describes politics that claims to side with “ordinary people” against a small, powerful elite, often by stirring up anger at that elite. Populism can come from the left or the right; what matters is the us-versus-them story. In the article, attacking billionaires is a populist move because it channels voters’ resentment of the very rich.

Meaning:The vanguard is the front of an army moving forward, and by extension the leading group in any movement, the ones who go first and show the way for others. Being “at the vanguard” can be a compliment or a warning, depending on whether you like where they are heading. Here, supporters hope California’s tax will lead the nation, and opponents fear exactly that.

Meaning:To nullify something is to cancel its legal force, so that it counts as if it were never there. It comes from the Latin for “nothing”. Courts can nullify a contract and voters can nullify a law. In the article, billionaires are backing ballot measures designed to wipe out Prop 40 if it passes.

Economics. Most taxes hit flows: an income tax takes a share of what you earn this year, a sales tax a share of what you spend. A wealth tax is different: it hits the stock, the total value of what you already own (shares, companies, property), whether or not you earned anything this year. Prop 40 would take 5% of each billionaire’s net worth, once.

The case for: the very richest hold most of their fortunes in shares that rise in value, and unsold gains are not taxed as income, so some billionaires pay a low rate compared with their wealth. Supporters say a wealth tax reaches money income taxes miss; Prop 40 would pay for public health care.

The case against: wealth is hard to value (what is a private company worth?), and the rich can move. A state that taxes them may lose them, and with them their future income-tax payments and their investment in local firms. That is why Governor Newsom says it should be done federally, where leaving is much harder than crossing a state line. Many countries have tried wealth taxes and later dropped them for these reasons.

Civics. In most of the US, laws are made by elected legislators. But California and about half the states also allow direct democracy: citizens who collect enough signatures can put a ballot initiative (a “proposition”, or “Prop”) straight to voters, who decide yes or no on election day. Prop 40 was one of these, which is why the governor and legislature could not simply block it.

The rules matter. Some measures need only a simple majority, more than half of votes cast, while others need a supermajority. Because ballots hold many propositions, campaigns can be expensive and confusing, and rival measures can be pitted against each other, as billionaires have done by funding initiatives to cancel Prop 40.

Initiatives can reshape a state for decades. In 1978 California’s Proposition 13 capped property taxes. It was popular, but it also changed how local governments raise money and inspired tax revolts elsewhere. That is the history Mr Sanders and Mr Brin each see repeating.