KPCC's business analyst Mark Lacter talks about presidential fundraising in the Southland; he also talks about how there's lot more resting on rich Californians than politics these days.
Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, President Obama and Newt Gingrich were both in LA recently to raise money. I'm sure we haven't seen the last of the presidential candidates...?
Mark Lacter: Without a doubt Steve - the money is readily available and fundraising is relatively easy. You just look at President Obama being able to get 80 people to pay $36,000 a plate for dinner last week. That's around $3 million without even blinking. Now, a lot of this money comes from Hollywood, of course, but what's worth remembering is that L.A. is home to
enormous amounts of wealth coming from a variety of industries - not all of them leaning Democratic. So if you look at the state Franchise Tax Board numbers for 2009 (that's the most recent year available), you have around 41,000 households in L.A. County reporting at least $400,000 in adjusted gross income. Many of these folks are not just one percenters - they're more like quarter percenters.
Julian: And I wonder if their giving will actually go up this year.
Lacter: Very possible because they'll be donating to the so-called super-PAC organizations, which allow the very wealthy to bypass the legal restrictions of giving directly to a campaign. Near the top of the California contributors is Jerry Perenchio, the former head of Univision, gave $2 million to American Crossroads, the super-PAC being led by Republican strategist Karl Rove. At the other end you have Jeffrey Katzenberg, the CEO of DreamWorks Animation, who
gave $2 million to a group called Priorities USA Action (Steven Spielberg gave $100,000 to the same group).
Julian: Doesn’t Mitt Romney have his own super-PAC?
Lacter: He does – it’s called Restore Our Future and there’s a sizable list of local contributors - an L.A. developer, the head of an L.A.-based private equity firm, and an Orange County auto dealer - they each gave $100,000. Just last month, Restore Our Future raised more than $6 million nationwide. That includes Meg Whitman, the former Republican candidate for governor, who gave $100,000. Romney contributed pretty heavily to her campaign a couple of years ago.
Julian: These days, there’s a lot more resting on rich Californians than politics.
Lacter: You can argue whether having wealthy people play such a large role in the election is a good or a bad thing, but there's not much debate about having them pay a disproportionate share of state income taxes - even though there probably should be. We're talking about roughly two-thirds of the state's total tax bill that's paid by households that make more than $200,000 a year. The reality is that without rich people much of state government would be effectively wiped out. There's just no other place to generate that kind of money - not through sales taxes or corporate taxes or anything else. This is why Sacramento officials are so excited about Facebook becoming a publicly traded company: Suddenly, you have hundreds of people who are about to become millionaires - in a few cases billionaires - and they'll have some hefty tax bills to pay.
Julian: Is it that clear cut?
Lacter: Well, there's a pretty obvious flaw in the system: When the economy turns sour, those high-end personal income taxes fall off sharply, which means that the state doesn't have enough money to operate. Actually, if you go back 10 or so years, you'll see this up-and-down pattern. It seems that the more sensible approach is to overhaul the tax system so that most everyone has a little skin in the game - not just the very wealthy.
Julian: Be sure to write when that happens...
Lacter: Well, it’s not going to happen – the politics is pretty much impossible, which is why Gov. Brown's tax proposal would boost the income taxes of wealthy households over the next five years. In other words, the governor wants to bankroll the economy on the 1 percent crowd, which sounds good but doesn’t work very well.
Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.