(Editor’s Note: This commentary article originally appeared in the Los Angeles Times November 17, 2016)
California’s reputation as an anti-tax mecca took a beating at the polls with the passage of three statewide taxes and hundreds of local taxes. Here’s betting that a battle over the Holy Grail of the tax revolt, Proposition 13, is on the horizon.
Because of changing demographics and attitudes in left-leaning California, a once-centrist state is seeing altered stances on a number of issues, from gay marriage to immigration to marijuana legalization. The tax issue is no different. Voters embraced tax limitations and spending limits over the past four decades, but they overwhelmingly supported tax increases this election.
While the three statewide taxes — continuing an income tax, increasing a tobacco tax and establishing a marijuana tax — saw a majority of voters support levies on narrow groups of taxpayers, local tax increases on sales and property taxes through bonds and assessments were more widely applied. Of the 430 such measures on the ballot Tuesday eight out of ten passed, according to the California Local Government Finance Almanac.
Given that success, tax advocates may try to use ballot measures to tackle two looming state issues: massive unfunded public pension liabilities and healthcare costs.
Voters’ willingness to tax themselves last week may signal that the state’s famous tax cutting measure could be undone.
According to the Stanford Institute for Economic Policy Research Pension Tracker, California’s pension debt is almost $300 billion, based on the state’s expectation of 7.5% investment returns. Using more realistic investment estimates, the debt is close to $1 trillion. The state must either curb pension costs or increase taxes to cover them.
In addition, California has embraced the Affordable Care Act more fully than any other state. If the Trump administration in Washington makes changes to the act that cut back on those who rely on the health insurance plan, the state could try to step in to cover expenditures and seek new taxes to pay the costs.
Further, if Democrats control a two-thirds vote majority in the Legislature — possible, but votes are still being counted — the election results might embolden a push for even more tax increases. There is already talk of the need for new transportation dollars plus chatter about raising taxes on candy, snack food and soda, now bolstered by three soda taxes voters approved in the Bay Area.
For many years now, those who think the state programs should grow have expressed a desire to take on Proposition 13 and its tax cap provisions. Most of the discussion has been about raising taxes on commercial property. However there also have been whispers about undoing all of Proposition 13, including removing protections on residential property over time.
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