Opinion: Another, wonkier argument in favor of Gov. Brown’s ‘bridge’ tax

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The Times’ editorial board -- known to some readers as the gang that never met a tax increase it didn’t like -- endorsed Gov. Jerry Brown’s call to keep the vehicle license fee and sales taxes at their current, elevated levels until voters have a chance to decide whether to extend them. Those taxes, which were increased on a temporary basis in 2009, are due to fall July 1 -- by half a percentage point for the vehicle license fee and by a full percentage point for the sales and use tax.

The board’s editorial Friday dismissed the Republicans’ proposal to rely on an unanticipated surge in tax revenue, noting that almost all of the surge had already been claimed. Proposition 98 steers almost half of those dollars to schools, and the Legislature used most of the rest to address problems in Brown’s earlier budget proposal -- for example, by canceling part of the proposed personal income surtax.

Here’s another reason cited by Democratic budget-writers: Without the ‘bridge’ tax, the state may not be able to sell the revenue anticipation notes that it relies on to pay its bills during the summer. These short-term securities give the state an inexpensive solution to the cash-flow problems it regularly encounters, enabling it to borrow against the tax revenue it expects to collect that fiscal year.

Credit rating agencies won’t support the notes, however, if there’s too wide a gap between what the state plans to spend and what it’s likely to collect. And they’re not likely to accept a promise to repay billions of dollars worth of notes if the revenue depends on taxes voters might not approve.

A bridge tax that brings in roughly $1 billion a month should help narrow the budget gap in the current fiscal year enough to enable the state to sell revenue anticipation notes. If it can’t, the alternative is a much more expensive forms of borrowing, such as warrants and bonds. And if investors are spooked about notes, it’s not clear they’d be willing to buy other forms of state securities.

I know, some folks will probably say it would be better to leave the state with a crippling cash-flow problem than to keep the sales and vehicle taxes at their current rates. I’m not eager to test that hypothesis, though.

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-- Jon Healey