Restructuring Must be Part of the Budget Deal
Reportedly, Governor Jerry Brown will propose a budget today that includes severe spending cuts and a proposal to extend temporary tax increases. But the trade off of spending cuts for tax increases is not enough. Restructuring the way we operate government should be part of the package.
As of this writing, I don’t know how long a period Brown wants the taxes extended. Another two years? More? Or is the idea to make them permanent? However, the life expectancy of the spending cuts could be very short. Proposition 25 passed by voters in November allows a majority vote to pass the budget. That means, once the tax increases are in place, for whatever length of time, the spending side of the budget can be altered by a majority vote by the Democrats next year.
Democrats are not happy with the budget cuts and could and probably would alter them as soon as possible.
Republican legislators will balk at such a scenario and won’t accept a deal of tax extension for deep spending cuts.
Budget Could Put GOP in a Bind
When Gov. Jerry Brown presents his, to steal a phrase, “terrible, horrible, no good, very bad” budget this morning, Republican legislators could quickly find themselves in a bind.
Brown has spent the days and weeks since his November election telling anyone who will listen just how ghastly a financial fix California is in and the type of something-for-everyone-to-hate budget that’s going to be needed to keep the state afloat.
Nobody and nothing will be spared, the governor promised, including plenty of programs his fellow Democrats have gone to war over in the past.
The spending plan will be smoke and mirror free, he pledged, and will show Californians exactly how much shared pain will be needed to staunch the fiscal bleeding.
All that’s way easier said than done, but if the governor follows through on his promises, GOP lawmakers face a dilemma.
How to seek voter approval of taxes is not an obvious path
Should
the Governor today propose tax increases to be voted on by the people in June, as strongly rumored, then I will look forward
to answers to several questions:
1.
How will he place the
question on the ballot? There are only three ways to put a tax measure on the
ballot: (a) citizen initiative, (b) legislative amendment of an approved voter initiative
(by a majority legislative vote), or (c) legislative constitutional amendment
(2/3rds legislative vote).
2.
If by citizen
initiative, is there enough time and resources to make a June deadline?
3.
If by amending an
approved voter initiative, which initiatives would be amended?
4.
If by constitutional
amendment, would the amendment put the actual tax increases in the
Constitution, or would the tax increases be approved by the Legislature
contingent on passage of a constitutional amendment on a different subject
(say, budget reform)?
The Answers to Our Financial Problems?
Eight years ago, I served as Chairman of the California Commission on Tax Policy in a New Economy. We held 17 hearings around the state and listened to options for revising the California tax system.
The events drew people from all socio-economic backgrounds and analyzed 12 tax policy proposals using the following principles: fairness and perception; simplicity; and efficiency and balance. The commission made 12 recommendations to fix our tax structure, including proposals to:
-
Lower the sales tax rate but extend it to services
-
Reduce the voting requirement to raise special taxes on the local level
-
Periodically reassess non residential property to market value
We issued our final report in December 2003, one month after Arnold Schwarzenegger replaced Governor Gray Davis. The new administration ignored our recommendations.