The direction the state will take on the big issues of taxing and spending will be set by tomorrow’s election. While the result of the gubernatorial and legislative races will certainly affect that direction, the most immediate impact on budget/tax policy will be determined by the results on Propositions 25 and 26.
Proposition 24 is also an important tax-related measure, which should be defeated. Encouraging job growth in California is essential to getting us out of our deficit hole. If passed, Prop 24 would cripple job growth legislation put in place last year. However, Prop 24 is not as far reaching as its neighbors on the ballot, Prop 25 and 26, so I will concentrate on the latter.
Proposition 25, if passed, opens the door to more taxes and more spending. Most immediately the measure would lower from two-thirds to majority the vote required to pass a budget but would likely leave the spending budget unmatched by revenues. To solve that unbalance, the legislature would look to majority vote fees, borrowing and other budgetary gimmicks that will leave our budget situation no better off after the election than it was before.
But, Prop 25 is only the first step in a plan to squeeze more money out of taxpayers. The proposal completely funded by public employee unions, which have a list of tax increase suggestions a mile long, purports not to allow tax increases without a two-thirds vote. Some legal experts have argued language in the measure could allow majority vote tax increases. Putting that aside for the moment, there clearly is a belief by proponents that Prop 25 will put out the welcome mat for new taxes.
In the many Proposition 25 debates I engaged in over the course of the campaign, I frequently heard supporters of the measure argue that the tax argument is "for another time." Or, they would say, a budget created under the provisions of Prop 25 would produce "pressure" for taxes.
Clearly, the two-step plan for supporters of Prop 25 is to pass a majority vote for the budget and then create an environment to change the rules on taxes.
There is no effort by the backers of Prop 25 to deal with the spending side of the budget equation. They just want that to continue to spiral up.
Proposition 26 confronts the advocates for more revenue who don’t like the rules the voters of California have put on them.
Four times since 1978, California voters have checked the box on the ballot that supports a two-thirds vote for taxes on the state level and a vote of the people on the local level. Proposition 13 established those rules in 1978, and the state/local government tax provisions were reaffirmed in 1986 (Prop 62), and 1996 (Prop 218). When an effort to dump the two-thirds vote to raise taxes in the legislature was placed on the ballot in 2004 (Prop 56), it was overwhelmingly rejected.
Politicians in both state and local governments have searched for a way around the people’s wishes and have implemented fees that really are taxes. By bringing in revenue above and beyond the service a specific taxpayer receives for paying the fee, the so-called fee should be classified as a tax. Proposition 26 would end this con game.
The business community and ultimately consumers will be in the crosshairs if Proposition 25 passes and Proposition 26 fails. While labeling businesses or their products as villains, fees will be levied on products and services. In the end, this course will punish consumers and job growth, which in turn keeps us bogged down in the mire of a poor economy.
The impact of the vote on Proposition 25 and Proposition 26 will be felt far and wide. My recommendation: Vote No on 25 and Yes on 26.