The voters have spoken. All the ballot measures of major fiscal consequences went down to defeat. Most pundits agree the defeat of the key measure, Proposition 1A, was due to the fact that tax increases would be extended for two years.
So what happens on the tax front now?
Taxes will suddenly be referred to by their “nom de plume”: Fees. The voters will not be fooled. If they don’t want taxes they won’t want fees, either. Fees are often aimed at certain products and the added fees drive up the costs the consumers ultimately pay. Fees, in many cases, are disguised taxes.
Another thing we’ll probably see is an attack mounted against the two-thirds vote requirement to raise taxes and to pass the budget. Undoubtedly, the majority in the legislature want both lowered. They may say they just want a majority vote for the budget but that plan has a weakness. See the discussion about Fees, above. If the budget is a majority vote then majority vote fees will be recruited to fund the majority vote budget.
There is one way to see support for a majority vote budget from the anti-tax groups. That is to raise the requirement to pass fees to the two-thirds vote standard.
Activists who want to lower the two-thirds vote and raise taxes will argue that a low turnout election really doesn’t represent the will of California’s people. Expect to see tax raising initiatives aimed for the general election in 2010 along with a measure to lower the two-thirds vote.
Voters rejected a move five years ago to reduce the two-thirds standard and their attitude on the issue seems more set in stone today. I doubt it will soften much in another year.
So, if raising fees, seeking tax increases via the ballot, and attacking the two-thirds vote requirement must not happen next, what should happen next?
Besides implementing restructuring that has been addressed by the California Performance Review and other studies over the years, the legislature should do everything it can to spur economic activity and create jobs. That’s how we can get out of this mess. Encourage the entrepreneur to lead the way.
As a well-known Democrat taught us nearly two decades ago: It’s the economy, stupid!