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Taxing semantics

January 12, 2011 |  6:12 pm

Brown During last year's campaign, then-Atty. Gen. Jerry Brown promised to let voters decide whether taxes should be increased to help close the state's yawning fiscal gap. The budget  he proposed this week, though, doesn't raise taxes so much as it keeps the current, elevated rates for sales, vehicle license and income taxes in place longer than the Legislature originally planned.

In other words, Brown wants voters to continue the status quo for a few more years rather than cutting taxes at a time when the state is drowning in red ink.

That's not how the anti-tax group Americans for Tax Reform views things, however. According to the Sacramento Bee, ATR's Patrick Gleason warned Republican lawmakers  that voting to put Brown's proposal on the ballot would violate the pledge they took not to raise taxes.

ATR seems to be running counter to its own reasoning on the Bush-era tax cuts. Last year the group made its arguments in favor of extending the cuts from the point of view of 2010 tax law. Allowing the cuts to elapse, it argued, would amount to "the largest tax hikes in history."  From the point of view of 2011 tax law, though, what Congress was debating was a reduction in taxes, pure and simple. That's because individual income tax rates were set to revert to pre-Bush levels in 2011, so voting to renew the Bush rates amounted to a tax cut.

From the 2010 point of view, Brown hasn't proposed to raise taxes; he's called for postponing a tax cut. Yet ATR prefers to view Brown's proposal from the perspective of what the rates will be after current law expires. In other words, it argues that Brown wants a tax hike.

I don't mean to practice sophistry here. What the governor has proposed to put on the ballot would, if passed, result in people paying higher sales, vehicle and income taxes than they would if the law were left unchanged. And the most perceptive taxpayers among us may notice that the state started withholding 0.25% less from their paychecks as of Jan. 1, when the income tax increases expired. That translates to $10 less in taxes out of every $4,000 earned.

The bigger-ticket items for many people, though, are the sales and vehicle taxes, which aren't scheduled to drop until July 1. That's why Brown's proposal won't feel like a tax hike to most Californians -- they're already paying those rates.

Whether Brown has struck the right balance between revenues and spending cuts, or whether he's picked the right sources of revenue, are separate questions that lawmakers should debate. It's also worth asking whether Brown is asking lawmakers to break a promise on tax rates that voters said in 2009  they wanted to be kept. But pressure from groups like ATR will probably frame the debate in much simpler terms: Not whether the state can afford to cut taxes but whether now's the time to raise them.

Related:

Budget gamble

A reality-based budget

How would you balance California's budget?

-- Jon Healey

Credit: Hector Amezcua / Sacramento Bee/MCT

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