Brown Miscalculates

The governor's tax proposal doesn't raise enough revenue, plus it might not pass.

Over the past several weeks, Governor Jerry Brown has repeatedly urged backers of proposed ballot measures that would tax the rich to abandon their efforts and support his tax plan instead. Brown has expressed concerns that voters will reject the measures if there are too many of them on the November ballot. He also has insisted that his plan has the best shot at winning. But several labor unions who support competing tax proposals contend that Brown may be wrong about the prospects of his plan. Moreover, Brown’s plan seems to be too timid, and will fail to raise enough money to close California’s budget gap.

Brown’s budget (which his administration accidentally released last week before it was ready) acknowledges that fact. Even if voters approve his proposed tax measure this November, the governor still plans to further shred California’s social safety net. His plan calls for cutting $2.5 billion in funding for health and social services for low-income residents — and that’s on top of $15 billion in cuts since 2008. Brown plans to slash $946 million from CalWORKS, $842 million from MediCal, $163 million from in-home support services, and $447 million from child-care programs, plus more.

Why such deep cuts? Because Brown’s tax measure proposal is too meager. According to his own estimates, it would raise $6.9 billion a year, which is not enough to avoid deep cuts to state services. Brown’s plan calls for raising income taxes by 1 percent on residents who earn more than $250,000 annually; 1.5 percent for those who earn between $300,000 and $500,000; and 2 percent for people who earn more than $500,000. It would also raise the state sales tax by one-half percent.

Brown’s plan, however, appears to be even more timid than he projects. According to the nonpartisan state Legislative Analyst’s Office, the governor’s proposal will only bring in $4.8 billion a year — about $2 billion less than he contends. As a result, his proposal may force another $2 billion in budget cuts, probably to K-12 education.

But that’s not the only problem with the governor’s idea. It also might not gain voter approval. That’s because it includes increased taxes on people who many consider to not be part of the One Percent — residents who make between $250,000 and $500,000 annually. And sales-tax hikes tend to be unpopular because they’re inherently regressive: Low-income people tend to spend a much higher percentage of their take-home pay on items that are subject to sales taxes than do the rich.

Joshua Pechthalt of the California Federation of Teachers and the Courage Campaign, which is backing a competing ballot measure to Brown’s, says his organization did extensive polling over the past year and found that a proposal like the governor’s may face trouble at the ballot box. California residents overwhelmingly want to raise taxes on people making more than $1 million a year, but approval for tax hikes progressively declined when voters were asked about income levels below $1 million, Pechthalt said. Moreover, sales taxes are toxic to many voters.

That’s why the CFT and other progressives favor a so-called “millionaire’s tax” that would raise taxes by 3 percent on incomes above $1 million and by 5 percent on those above $3 million. “Support for taxing the rich is major,” Pechthalt told Seven Days. “But support begins to drop off as you go down in income level.” A millionaire’s tax also would likely raise more money each year than would Brown’s.

Nonetheless, the governor continues to push his plan while urging labor to drop all other proposals. In doing so, the governor says he’s staking out a middle ground, believing that voters ultimately will prefer a proposal that includes a mix of budget cuts and tax hikes. But it appears that Brown isn’t paying attention, and is seriously underestimating the loud populist call for taxing the rich in California. As result, his plan, if it becomes the only one on the ballot, may fall short, forcing California to once again deprive residents of services. And children, who need those services the most, would be hit hardest.

Three-Dot Roundup

Reforming California’s public-employee pension system could end up costing taxpayers lots of money in the short-term, the Legislative Analyst’s Office also reported. The office examined two proposed ballot measures that would convert public-employee pensions to 401k-style retirement plans and concluded that they would force local governments to contribute much more than they do now to the state’s pension system. The reason is that pulling new employees out of the current pension system would starve it of funds needed to pay retirees. In fact, it could take twenty to thirty years before such pension reform starts to save taxpayers money. … Brown also is proposing to overhaul K-12 education funding in the state in an effort to simplify it and make it fairer. The governor’s plan would eliminate most mandated programs and shift more responsibility to local school districts. The plan also would provide extra funding for schools with students from low-income families. However, California teachers’ unions oppose part of the plan because it could result in larger class sizes in many schools. … Air pollution in California has been particularly bad this winter because the high-pressure system parked over the state is keeping the air stagnant, the San Francisco Chronicle reported. That same high-pressure system is pushing normal winter storms and rain away from the state, raising concerns about another drought. … East Bay Assemblywoman Mary Hayashi called her shoplifting spree at San Francisco’s Neiman Marcus an “absent-minded error,” the Contra Costa Times reported. Hayashi backed away from her lawyer’s claim last week that a benign brain tumor was responsible for her stealing $2,450 worth of clothes. Hayashi pleaded guilty to a lesser charge last week and was sentenced to three years probation. … Opponents of a planned sports park in Piedmont have filed suit in an attempt to require additional environmental review of the controversial project, the Oakland Tribune reported. The City of Oakland has threatened to sue Piedmont over the same issue. … A Superfund site in Richmond that was supposed to have been cleaned up is still leaking two pesticides — DDT and dieldrin — at astonishingly high levels even though the toxics haven’t been used in decades, the CoCo Times reports. Some fish around the site, which leaks into the bay, now show higher levels of pesticides than those measured before the Superfund clean-up. … And President Obama last week defied Senate Republicans and made a series of so-called recess appointments to strengthen consumer protection and labor standards.


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