At Gov. Jerry Brown’s May budget revision press conference, when asked about benefits that could come to California from a federal tax cut, Brown dismissed the idea that tax cuts would boost revenues, in the process dredging up nearly 40 year-old pejoratives for such an idea. “Voodoo economics” and a “riverboat gamble,” Brown declared. However, the Jerry Brown of the 1990s would not agree with the Jerry Brown of today. Neither would some former presidents.
“Voodoo economics” was a term used in the 1980s by George H. W. Bush for supply side economics. The term “riverboat gamble” Brown attributed to former U.S. Senator Bob Dole, who ran for president in the 1990s.
Brown’s support for a flat tax during his 1992 presidential run was the kind of supply-side economics that Brown rejected yesterday. His plan in 1992 was actually endorsed by the New York Times, the New Republic and Forbes.
There would not be agreement from Presidents Coolidge, Kennedy and Reagan, either. All three cut taxes and saw revenue climb.
The historical references were an unexpected rebuke since Brown made a point of the importance of remembering the past. He encouraged legislators to remember that increasing tax revenue is not forever and that recessions hit from time to time. Brown said at age 79, he thinks of the past.
While not being supportive of tax cuts, Brown did recognize a reverse problem—high taxes could damage the state budget. When asked about a plan to raise income taxes to create tuition free higher education, Brown noted that California was near the breaking point of high income tax rates. He compared California’s 13% top tax rate with neighboring Nevada’s zero rate.
Keep raising taxes, and high-end taxpayers will look for new havens.
To give Brown his due on state spending problems, he admitted the political pressures of putting together a budget in California with a legislature that never seems to have enough to spend. Brown offered that the budget would be “more fiscally constrained” if it was totally his responsibility. Still, the May Revise came in at $2.5 billion more than the budget the governor put out in January.
Brown made a point of pointing out the “phenomenal” money spent on education and the additional $19 billion increase of revenue spent on anti- poverty programs just four years ago. But, as usual, Brown’s budget came with warnings. He said a moderate recession would hit the budget with a $55 billion shortfall over three years.
The May Revise General Fund budget stands at $124 billion, with overall spending including federal funds, special funds and bonds at $290.2 billion.