Governor Jerry Brown has announced that he will file a ballot initiative to hike taxes on sales and wealthy earners, which brings to 5 the number of potential tax-related measures competing for the November ballot. Brown’s initiative would raise income taxes on wealthy Californians and increase the sales tax by half a cent for four years. The income tax hike would be retroactive to January 2012, while the sales tax would increase January 2013. The proposal would raise an estimated $7 billion annually over five years, which still is not enough to fully cover the projected budget shortfall next year, which the Legislative Analyst’s Office has estimated will be $13 billion. CLICK HERE to read Governor Brown’s letter.
The governor says in his letter that the new revenues will “be spent only on education,” seemingly a nod to polling data showing that voters may be willing to support taxes for public schools. Of course, the initiative frees up general fund money that can go toward a variety of other state programs, such as corrections, universities or social services.
As a competing proposition, the California Federation of Teachers has proposed an initiative that would raise $6 billion for K-12 education solely by raising income taxes on Californians who earn more than $1 million a year.
Another proposal, backed by the state PTA, would raise $10 billion a year in new revenue by raising taxes on a sliding scale on nearly all wage earners, with the heaviest burden on the wealthiest. The money would go directly to local K-12 schools and early childhood education. The measure forbids the governor and legislators from using the money or directing how it may be spent. The measure is sponsored by Los Angeles attorney Molly Munger, whose billionaire father, Charles Munger, is a longtime top associate to Berkshire Hathaway CEO Warren Buffett.
A fourth initiative, backed by billionaire Nicolas Berggruen and a bipartisan group of business and civic leaders, would radically overhaul the state’s tax code by taxing services and cutting income tax rates.
Other groups are mulling targeted tax hikes on out-of-state companies and oil production in California, as well as the perennial debate over commercial property tax rates set in Prop 13.
The initiatives would circumvent the legislature, where a two-thirds vote is needed to hike taxes. The legislature’s minority Republicans have blocked efforts to raise taxes, including a bid by Governor Brown earlier this year. Only a simple majority vote is needed to enact a statewide tax ballot measure.
Conventional wisdom indicates that most of these efforts will not qualify, however the competing interests could lay waste to a rare opportunity in which Californians are open to raising taxes. If voters are faced with too many choice, especially similar-sounding ones, history shows they vote no on all of them. For more information contact Kate Klimow, Vice President of Government Affairs.