When President Obama presents his plan to level the playing field — just a bit — between the wealthy and not so wealthy in his State of the Union address Tuesday evening, he could point to the Bay Area as the perfect testing ground.
It has all of the elements: two of the three richest regions in the country (Silicon Valley and San Francisco), and the nation’s third highest percentage of millionaires by population (San Francisco, whose wealth gap is on a par with Rwanda). In 2013, those making more than $100,000 grew to 42 percent of households in the nine-county Bay Area, 4 percent higher than 2007, according to a Bay Area Council Economic Institute report last week.
Obama’s new tax plan is pro-work and worth exploring
Presidential race shapes up over wages, jobs for the middle class
Obama to call for tax changes in State of the Union address
On the other side, middle-class households, making between $35,000 and $99,000, declined for the third straight year in 2013 to 38 percent. Those making less than $35,000: 19 percent, same as 2007. Since 2008, the median income in the Bay Area has fallen by 9 percent.
“I was really surprised at that one,” said Tracey Grose, who directs economic and policy research at the institute. “Over the previous two business expansions, in the 1990s and the one leading up to the financial crash, median incomes grew. But not this time. I find that troubling.”
Obama’s proposals are aimed squarely at what a recent report by Grose labeled “the squeeze of the middle.” He is calling for the existing earned income tax credit to be extended to couples earning less than $120,000, making paid sick leave — up to seven days — mandatory for all employees, expanding child care, higher education and other tax credits, free community college for those who want it, reducing fees on government-backed home loans, and requiring companies to enroll employees into a retirement savings plan.
And who would pay for this estimated $370 billion transfer of wealth? Those who have come out way ahead since the end of the Great Recession — like those along the San Francisco-Silicon Valley corridor. Obama proposes increasing the top capital gains tax from 20 to 28 percent, closing the “trust fund loophole,” which enables certain inheritances to be passed along tax-free, and imposing fees on financial institutions with over $50 billion in assets, according to a White House fact sheet.
Unsurprisingly, Obama’s “simpler, fairer tax code that responsibly invests in middle-class families,” as touted by the White House, has already been pronounced dead on arrival.
“The president needs to stop listening to his liberal allies who want to raise taxes at all costs and start working with Congress to fix our broken tax code,” said Sen. Orrin Hatch, R-Utah, the new chairman of the Senate Finance Committee, over the weekend.
As populist as it may sound, there should be some real support for Obama’s proposal among the Bay Area’s well-heeled. The region votes overwhelmingly for Democrats, including many from the 1 percent. They are already two years into Proposition 30, which raises income tax rates as much as 13 percent, and seem no worse the wear. The invasion of the tech nouveau riche over the last few years doesn’t seem to have made San Francisco any less liberal.
The issues Obama raises with his proposals aren’t going to go away, especially with the 2016 presidential campaign already under way. It would be interesting to find out how the Bay Area’s 1 percent (and 2 and 3 percent) stand on the issues and to what extent they’re prepared to chip in.
“The most extreme manifestations of the growing income and wealth gap nationwide are right here, in the Bay Area,” said Grose.
Your tax credits at work. Last week Gov. Jerry Brown’s office handed out $31 million in tax credits to Bay Area and California companies creating or expanding jobs in the state. The awards are projected to help 56 companies create approximately 4,900 jobs and generate over $900 million in investments in California, said the Governor’s Office of Business and Economic Development.
It’s the second round of awards from the California Competes initiative, incorporated into law as part of a broader economic development plan in 2013. Total so far: approximately $60 million for 85 companies, estimated to create 10,000 jobs and make close to $3 billion in investments.
Bay Area recipients in the latest round include Arkay Acquisition, a bus manufacturer in Livermore; Neustar, a cloud data analytics company in San Francisco; MAC Thin Films, a film coating manufacturing company in Santa Rosa; and East Bay Ophthalmology in Pinole.
There’s more where that came from. Applications for $75 million in tax credit are due by Feb. 2 at www.calcompetes.ca.gov.
Andrew S. Ross is a San Francisco Chronicle staff writer. E-mail: email@example.com Blog: http://blog.sfgate.com/bottomline Twitter: @andrewsross