In this time of Covid-19, public sector unions see an opportunity for a tax gusher. The Proposition 15 property tax increase measure funded largely by public unions could raise $12.5 billion. Assembly Bill 1253, introduced this week by fifteen Democratic legislators and encouraged by the public sector unions, is projected to raise $6.8 billion by creating different tax tiers for millionaires. Taken together, the pair of proposals consist of massive, unprecedented, historic tax increases in a time of economic devastation.
Ironically, the big, dual tax increase hit was discussed last year. Remember, while signatures were being collected for the split roll property tax that eventually became Proposition 15, the California School Boards Association got behind a tax on millionaires and million-dollar corporations.
However, last December the School Boards tax was scuttled with the excuse that if it competed on the ballot with the split roll property tax increase, both measures would fail.
Desperation by public entities—ignoring the same desperation felt by businesses and taxpayers during these extraordinary times—has school and other public unions pursuing both tax increases. Instead of putting both proposals on the ballot, the income tax increase is being sought in the legislature, while voters will consider the property tax increase on businesses.
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The unions hope to hitch their wagons to the equity issue along with confronting harm done by the coronavirus.
Just in case no one noticed, the coronavirus also devastated the business community and taxpayers.
That’s why the appeal for new income taxes is aimed at the top-end taxpayers who, supporters of the tax increase say, continue to do well during these tough times.
The income and business tax proposed last year by the Schools Boards Association always fared better in polls than the split roll. What caused the move to spike the School Boards plan and keep support behind the divisive split roll property tax was that the School Boards tax proposal dedicated its entire revenue gain to schools. The split roll sent 60% of the revenues to local government. The non-school related public unions wanted their piece of the tax pie.
Then the pandemic hit, and the public sector is demanding funds immediately. If Proposition 15 passes, revenue would not appear until sometime in 2022 at the earliest and it would not be fully implemented probably until 2025. If AB 1253 gets a two-thirds vote in the legislature and the governor’s signature, not only would it go into effect right away, but it would be retroactive to the beginning of 2020.
A signal from Governor Gavin Newsom could be crucial in moving the legislation.
Newsom is being pressured to support Proposition 15. If he decides to endorse the millionaire tax, he can sidestep the politically troubling prospect of taking on a change to the iconic Proposition 13 property tax limits, which is the motive behind the split roll, and still say he is supporting the schools financially.
This new income tax effort could be an indication that the polls still show trouble for Proposition 15 in a time of economic distress. AB 1253 then becomes a kind of insurance policy for the public unions. If the millionaire’s tax passes it will certainly change the rhetoric and messages surrounding the Proposition 15 campaign
But don’t expect the unions to abandon Proposition 15 even if AB 1253 is signed into law. They want it all. In this strangely different election year the public unions are going for broke.
And those that could end up broke in the end are businesses and taxpayers.