A Further Perspective

Jerry Swings for the Fences

He thinks he has California taxpayers right where he wants them.

By 5.18.12

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School boards over the years, when faced with opposition to a bond issue, have often resorted to a doomsday threat to get voters in line. If the bonds don't pass, they would say, school sports -- starting with football season -- will be canceled and the school band disbanded.

California's once and current governor has dusted that one off and is aiming it for the fences. Early this year he began promoting a tax increase package for the November ballot, telling everyone that if it were to be defeated at the polls in November, the public will have been forewarned that drastic budget cuts would follow. By early April it had 54 percent support in a poll.

He touts his tax increase measure as "temporary." (Ronald Reagan one said, "The nearest thing to eternal life on earth is a government program.") It would raise the state sales tax to 7.5 percent from 7.25 for four years. It would also raise income tax rates on those earning $250,000 or more a year ("millionaires and billionaires" as defined by Mathemetician-in-Chief Barack Obama). Those making $1 million or more would see their rate go from 10.3 percent to 13.3 percent -- easily the nation's highest. With more of the investor class changing their residences to income-tax-free states every year, one guess as to what will be the effect of that increase. 

Complications have set in. In addition to Brown's proposal having gathered enough signatures for the ballot, so have two others. One, headed by a hedge fund manager, Tom Steyer, would eliminate the choice companies now have to use a tax formula based on California sales in proportion to sales elsewhere or one based on sales, payroll and property only in California. Steyer's measure would eliminate the first option. Its purpose is to raise revenue for the government. 

The third measure, headed by "civil rights" attorney Molly Munger, would raise income taxes on a sliding scale for all but the poorest California workers for the next dozen years. The purpose is the same as Steyer's: to raise revenue for the state. It would make tax rates on higher income Californians even more lopsided than they are now.

Brown had been figuring on raising about $6 billion or so to erase most of a projected $9 billion budget deficit. That is until a few days ago when the state's green eyeshade people delivered the bad news that the deficit would be $16 billion, not $9 billion. The reason? Tax collections and other revenue this spring were well under estimates. 

Bad news for Brown? Not if he can use it to scare the voters into doing his bidding. It helps him make his threats all the more real. He talks of deep cuts to school budgets and aid to poor and ailing seniors -- on top of already-announced closings of state parks. Wave the specter of cuts to education at California voters and they usually succumb. 

Several years ago they voted for a ballot initiative that has required about 40 percent of the state's general fund go to education. This has not brought higher student performance, but in more than a few cases it has brought a surplus of school administrators.

Not mentioned in the governor's list of cost-saving targets are bloated public employee pension programs. In his first iteration as governor in the late 1970s, he signed the order permitting public employee unions to engage in collective bargaining. Gradually, but steadily, they have become the state's most powerful special interest. They virtually own the Democrats' legislative majority. A few months ago, Brown sent up a trial balloon to require state employees to pay more into their own retirement accounts and health care plans and to have less generous programs for new hires, but the unions and the legislative Democrats punctured the balloon.

Brown's proposal to cut state employee salaries is another trial balloon. It will drift away with the next breeze. And if you think he'll cut expenses by eliminating the FY 2013 budget's $2.3 billion allocation for that chimera, high-speed rail project, you are living in a dream. He sees that as his "legacy," but at the rate he's going his legacy will be bankruptcy. 

Nevertheless, Even California voters are uneasy about high taxes and deficit spending. With three tax-increase measures competing on the ballot, they just may say to all three, "Nuts!"

 

Peter Hannaford's latest book is "Reagan's Roots." He was closely associated with the late President Ronald Reagan for a number of years, including serving as director of public affairs in the Governor's Office. 

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About the Author
Peter Hannaford was closely associated with the late President Reagan for a number of years. He is a member of the board of the Committee on the Present Danger. His latest book is “Presidential Retreats.”