One of the hot tax issues during Jerry Brown’s first turn as governor was indexing the state income tax. Brown has noted recently he supported indexing. That’s only part of the story.
Indexing the income tax is a process of widening the tax brackets to account for inflation. Without indexing, a taxpayer would be pushed into higher tax brackets when inflation increased his or her income despite the taxpayer gaining no "real" income gain. Government benefited from this "inflation tax."
The legislature fully indexed the income tax in 1979 to cover the following two years and Governor Brown signed the bill. However, when the legislature attempted to continue full indexing the following year with a new bill, Brown vetoed it.
In what tax historian, Dave Doerr, called a "puzzling veto message" in his history of California taxation, (California’s Tax Machine) the governor wrote in his veto message, "The bill does not bring about indexing of the state income tax. What this bill does is simply remove from the Legislature in 1981 the option of continuing the 100 percent indexing or allowing a partial repeal of such indexing to save $231 million…"
Apparently, the governor was interested in the option of repealing the taxpayer benefits of indexing.
In response to the income tax indexing measure disappearing after 1981, Howard Jarvis filed an initiative to permanently index the income tax. Proposition 7 on the 1982 primary ballot used the California Consumer Price Index to measure inflation.
Jarvis called inflation "the cruelest tax of all." It would cause tax increases automatically when forcing taxpayers into higher tax brackets while government officials could sit ideally by.
Jerry Brown did not support Proposition 7. It passed with over 63% of the vote.
As Paul Harvey used to say in his radio broadcasts, "That’s the rest of the story."