Calif. Voters Mull Whether to Raise Taxes on the Rich

Calif. Voters Mull Whether to Raise Taxes on the Rich

By Lou Cannon - September 7, 2012

Republicans decry higher taxes on the rich as class warfare while Democrats defend them as just and necessary. This year in California, voters will have a rare say on the merits of these competing views when they decide the fate of Proposition 30, Gov. Jerry Brown’s gamble to balance the state’s shaky budget with a mix of income and sales tax increases.

Initiatives are a dime a dozen in California, but this is the first time any governor has put his tax plan on the ballot rather than try to win approval of it by the Legislature. Brown took this route because while running for governor in 2010 he defused GOP attempts to depict him as a free spender by promising to take any tax increase to the voters. Although this promise may have been “ill-advised,” as columnist George Skelton of the Los Angeles Times describes it, Brown intends to keep it.

The Golden State already has the nation’s second highest personal income tax rate. Brown’s initiative would create three new brackets for taxpayers with incomes exceeding $250,000. At the highest level, for those making more than $500,000, Prop. 30 would impose a 12.3 percent tax rate, an increase of more than 24 percent over the current rate.

Prop. 30 also raises the state sales tax by a quarter-cent to 7.5 percent. Together, these increases would bring in $9 billion, according to Brown’s estimate, or $6.8 billion, according to the non-partisan Legislative Analysts Office. The difference stems from the volatility of capital gains income from high earners.

Brown’s principal talking point is that California’s hard-hit schools need the money. Under a complicated formula approved by voters years ago, schools would receive about half of the new revenue. If Prop. 30 loses, schools stand to lose more than $5 billion.

Brown stayed home in Sacramento during the Democratic National Convention, trying to decide if he should sign a bill that expands state subsidies to Hollywood’s hard-pressed film industry, and trading long-distance barbs with New Jersey Gov. Chris Christie, who dismissed Brown as an “old retread” when he visited the California delegation during the Republican National Convention. (Christie celebrated his 50th birthday on Thursday; Brown is 74 and served two terms as California governor in the 1970s.)

The fit and slender Brown responded by challenging the New Jersey governor to a three-mile race and push-up and chin-up contests. Christie wisely turned him down. California Assembly Speaker John Perez, as hefty as Christie, chimed in by saying that “Christie should pick on someone his own size, and I’m right here if he wants to do that.”

Brown was an eccentric boy wonder the first time around as governor, earning the sobriquet of “Governor Moonbeam” from Chicago columnist Mike Royko for such off-the-wall proposals as a California space satellite. Of more consequence, Brown dithered as local property taxes soared and retirees living on fixed incomes were forced from their homes. Meanwhile the state sat on a huge surplus that could have relieved the local tax burden. Angry voters responded by passing the tax-limiting Proposition 13, which has squeezed state and local government ever since.

In his latest incarnation as governor, Brown has been focused and determined. As Juliet Williams of the Associated Press observes, Brown “has made austerity a hallmark of his administration, telling state workers they must turn in their cell phones, selling off state vehicles, severely reducing employee travel and cutting billions from the general fund.” With all the cuts, many to welfare and Medicaid programs, state finances remain so precarious that the budget will be out of balance by roughly $15 billion if Prop. 30 fails.

Nonetheless, Prop. 30 is an uphill fight for Brown, who was hurt when it was revealed that state park employees had hidden millions of dollars while threatening to close state parks. A radio commercial by an anti-Prop. 30 group asked: “What else are they keeping from us?” Opponents of the initiative hope to play on public suspicion of government, which is widespread in California (as elsewhere in the nation).

With two months to go before the election, Prop. 30 is well funded and leading in the polls. Even many of its supporters agree, however, that passage of the initiative is no better than an even bet. 

Lou Cannon, who is traveling in Scotland, has written about the campaign for RealClearPolitics.

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