Government: Gov. Brown pitches for more taxes
Everybody knows that voters don't like tax increases, which spells trouble for the ballot initiative that Gov. Jerry Brown submitted Monday to raise nearly $7 billion in taxes. Hoping to win voters over, Brown issued an open letter noting the billions of dollars that lawmakers cut from the budget this year and warning of "deeper and more damaging cuts to schools, universities, public safety and our courts" unless taxes are raised.
That message may be enough to persuade Californians who don't mind paying for better public services. For those who aren't convinced the state has cut enough, Brown offered three other inducements.
The first is that the taxes are temporary, expiring after five years. The second is that the tax revenue would go exclusively to the public safety, mental health and child protective services that were "realigned" from the state to the counties as part of the current budget. And third is that most of the tax increase will be paid by the wealthy. For most voters, that falls under the category of "not me."
Each of those assertions comes with caveats, though, that will make the initiative a tougher sell.
The tax increases may be temporary, but the measure would make this year's realignment permanent by writing it into the state constitution. Although it would also guarantee counties much of the proceeds from a newly created vehicle license fee and a portion of the state's sales tax, those amounts aren't expected to cover the counties' new costs. So when the temporary increases expire, counties may demand more from the state -- or from taxpayers.
The measure also writes into the constitution two new, audited funds within the state budget: one for counties' realignment costs, the other for local schools and community colleges. Wrote Brown in an open letter to the public: "This initiative dedicates funding only to education and public safety -- not on other programs that we simply cannot afford" (emphasis in the original).
But as the initiative itself points out, having a dedicated stream of tax dollars for realignment and schools will free up other state money "to help balance the budget and help prevent even more devastating cuts to services for seniors, working families and small businesses." In other words, state revenue is fungible.
Finally, in keeping with the Democratic Party's tax-the-rich theme (or rather, making the rich "pay their fair share"), the measure would levy a surcharge of 1% on taxable incomes over $250,000, raising that bracket's rate to 10.3%. The surcharge would rise to 1.5% on incomes over $300,000 and 2% on incomes over $500,000.
That's not exactly a tax on millionaires, but it's not the bulk of the electorate either. Not that anyone could escape the reach of the initiative -- it also includes a half-percentage-point increase in the state sales tax, to 7.75%. That would have seemed less jarring had it gone into effect on July 1, when the sales tax rate dropped from 8.25% to 7.25%.
Assuming Democrats can gather enough signatures, the measure would go on the ballot next November. Conventional wisdom is that Republicans and independents eager to oust President Obama will be more motivated to vote in that election, making passage of a tax increase unlikely. But the intervening months will also bring one or two more rounds of cuts to close budget gaps in California, along with some bitter fruits of the last round -- a shortened school year, sharply higher fees at state colleges and universities, and potentially more early releases of prisoners from local jails. Those developments might make the tradeoff of higher taxes for fewer cuts more appealing.
And depending on the outcome of other signature drives, Brown's proposal may not be the only one seeking to raise taxes in the state. These include a labor-backed proposal to raise money for schools, infrastructure and social programs through a permanent surtax of 3% to 5% on anyone earning more than $1 million a year (in addition to the 1% surtax they pay to support mental health programs), and a proposal by the reform-minded Think Long Committee to lower income and sales taxes but impose a new 5% tax on services.
-- Jon Healey
Credit: Rich Pedroncelli / Associated Press