Does Brown’s Compromise Guarantee its Defeat?

Tony Quinn
Editor, California Target Book

Five million dollars and three months from now, Democratic leaders and Gov. Jerry Brown may wake up and realize they’ve bought themselves a pig in a poke in their newest scheme to raise taxes.

In January, Brown proposed a tax initiative to raise sales taxes and high end income taxes over three years to help balance the budget.  Polling has shown that temporary tax increases to fund education are pretty popular, 68 percent favorable in one PPIC poll.  But once voters saw the Attorney General’s title and summary for the Brown tax increase, they did not like the specifics. The latest PPIC poll showed it was only winning by 52 percent, with 40 percent voting no.  That’s a sure loser.

The sure winner was the tax the millionaires initiative proposed by groups on the left.  Wall Street and millionaires are the new Great Satans in American politics; the millionaires tax campaign sent around poll after poll showing it was winning in the 70 percent range.

But Brown and Democratic leadership panicked and decided they had to kill this initiative on the grounds that more than one tax initiative meant sure defeat for all tax initiatives.  So they have merged the two, but in so doing they have adopted the unpopular parts of the Brown initiative and dropped the popular parts of the millionaires tax.

Here is the title and summary for first Brown measure that was falling like a rock in the polls:

Temporary Taxes to Fund Education. Guaranteed Local Public Safety Funding. Initiative Constitutional Amendment.

Increases personal income tax on annual earnings over $250,000 for five years. Increases sales and use tax by 1/2 cent for four years. Allocates temporary tax revenues 89 percent to K-12 schools and 11 percent to community colleges. Bars use of funds for administrative costs, but provides local school governing boards discretion to decide, in open meetings and subject to annual audit, how funds are to be spent. Guarantees funding for public safety services realigned from state to local governments. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Increased state revenues over the next five fiscal years. Estimates of the revenue increases vary–for 2012-13, from $4.8 billion to $6.9 billion; for 2013-14 through 2015-16, from $5.5 billion to $6.9 billion on average each year; and for 2016-17, from $3.1 billion to $3.4 billion. These revenues would be available to (1) pay for the state’s school and community college funding requirements, as increased by this measure, and (2) address the state’s budgetary problem by paying for other spending commitments.

And here is the title and summary for the new Brown-leftwing tax measure:

Temporary Taxes to Fund Education. Guaranteed Local Public Safety Funding. Initiative Constitutional Amendment.

Increases personal income tax on annual earnings over $250,000 for seven years. Increases sales and use tax by ¼ cent for four years. Allocates temporary tax revenues 89 percent to K-12 schools and 11 percent to community colleges. Bars use of funds for administrative costs, but provides local school governing boards discretion to decide, in open meetings and subject to annual audit, how funds are to be spent. Guarantees funding for public safety services realigned from state to local governments. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Increased state revenues over the next seven fiscal years. Estimates of the revenue increases vary—from $6.8 billion to $9 billion for 2012-13 and from $5.4 billion to $7.6 billion, on average, in the following five fiscal years, with lesser amounts in 2018-19. These revenues would be available to (1) pay for the state’s school and community college funding requirements, as increased by this measure, and (2) address the state’s budgetary problem by paying for other spending commitments.

Can you tell the difference?  Not very much is there.  The sale tax hike is cut in half but the tax is still increased; the total tax take is increased from $4.8 to $6.9 billion in the original Brown initiative to $6.8 to $9 billion in the second, so the second is a bigger tax hike.  Both measures raise taxes to “address the state’s budgetary problem by paying for other spending commitments” although the voters overwhelmingly oppose raising taxes to balance the budget.   Only 11 percent favored that in the latest PPIC poll.  So why would this new one do any better than the old one? And it does not solve the multiple tax initiatives problem; millionaire Molly Munger is still there with her tax initiative to raise everyone’s income taxes.  It is polling terribly; somehow the voters don’t buy the idea that they should raise their own taxes because some well meaning millionaire thinks it is a good idea.

The new Brown-leftwing initiative is likely to draw serious opposition whereas the original Brown measure might have slipped by without a major campaign against it.  An electorate that in recent years has turned down tax increases on tobacco and oil companies is unlikely to want to raise its own sale and income taxes, so all an opposition campaign needs to do is run against both Brown-leftwing and Munger as though they are single measure.  You can vote twice against high taxes.

If the original Brown measure, a shorter term more modest tax increase, was polling at only 52 percent, how will a larger tax increase over a longer period of time do any better?  Brown and company will need to spend upwards of $5 million to quality the new measure given the short time available.  It is hard to see how dropping measures with some political virtues for a measure with mostly vices is a good way to spend that money.

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