It is said that California is a harbinger for the nation. Since we’re having a national conversation about taxes for the wealthy, it’s natural that California would play a role in that conversation. But a difference of opinion in how to go about that conversation could result in a counter-productive disaster – or a bounty for the state, suddenly flush enough to pay for pressing priorities.
Yesterday, Gov. Jerry Brown penned an “Open Letter to the People of California,” announcing his intention to go to the ballot in November 2012 with an initiative that would raise revenues by roughly $7 billion annually. The revenues would be raised in two ways. One, with five-year tax increases on individuals making over $250,000 and families making over $500,000 a year; three new tax brackers would be created, with increases of up to 2% on income above $500,000. Second, Brown would impose a similarly temporary ½ cent increase in the sales tax. California just saw a one-cent increase in the sales tax expire in June, so Brown states correctly that even if this passes, “sales taxes will still be lower than what they were less than six months ago.”
Brown explained the need for revenues to ensure that the continued degradation of services in California stops. Last year, he tried to get legislative Republicans to provide the necessary votes for a 2/3 majority to get a tax increase on the ballot; this failed miserably. So this year, he will bypass the legislature.
The stark truth is that without new tax revenues, we will have no other choice but to make deeper and more damaging cuts to schools, universities, public safety and our courts.
That is why I am filing today an initiative with the Attorney General’s office that would generate nearly $7 billion in dedicated funding to protect education and public safety. I am going directly to the voters because I don’t want to get bogged down in partisan gridlock as happened this year. The stakes are too high [...]
This initiative dedicates funding only to education and public safety–not on other programs that we simply cannot afford.
On the last point, money is fungible, and any funds earmarked for education and public safety means that the General Fund won’t have to cut back on other areas.
You would presume that, with California’s governor coming out and endorsing a ballot measure to raise taxes on the wealthy once and for all, that the entire Democratic engine would be on board with the idea. You would be wrong. In fact, there could be as many as FIVE ballot measures on taxes, at least at the signature gathering stage, for November 2012. Billionaire Nicolas Berggruen has a group called Think Long with a reactionary ballot measure to reduce income taxes, extend the sales tax to services, reduce the corporate tax rate and somehow capture $10 billion annually. They certainly have the money to get that on the ballot. Civil rights attorney Molly Munger has a $10 billion plan to raise income tax rates on virtually everyone except the working poor. And a coalition of progressives, including the California Courage Campaign, the California Federation of Teachers and over two dozen other community groups, filed their initative today, called the California Funding Restoration Act, which raises its $6 billion annually only from millionaires, raising the income tax by 3 percentage points between $1 million and $2 million and by 5 percentage points about $2 million. This money, like most of the plans would be earmarked for public education, essential services, public safety and infrastructure. There’s a possible fifth initiative from a group of environmentalists led by Thomas Steyer, which closes a corporate tax loophole for $1.1 billion a year.
The history of California is that, when competing ballot measures on the same issue appear on the same ballot, it sows voter confusion and leads to a rejection of all of them. This could end up upsetting a clear preference for higher taxes on the wealthy from both the activist and the establishment communities.
But Rick Jacobs of the Courage Campaign says that his coalition filed their initiative because they believe it has the best chance for victory, based on extensive research they did throughout the year. “We did a lot of focus groups, 18 or something, and two rounds of polling, and we drafted an initiative,” Jacobs said in an interview. “We think people are ready to raise taxes, but they’re very cynical, and they’re ready to believe that someone rich is a millionaire, but they’re not convinced that half a million or 250,000 is rich. So we took the data and put together ballot measure that has best chance of passing.” Jacobs added that the lack of a sales tax increase in their initiative means that the average person stands unaffected. They also learned through research that swing voters don’t want the money to go to Sacramento, so they pay out to higher education and local services in their initiative, with the money held in a special account. And, unlike the Governor’s measure, theirs doesn’t have a sunset.
As for the fear that competing ballot measures will cancel themselves out, Courage has been in contact with both the Munger coalition and the Governor’s office. “We shared research with them. They came to their own conclusion,” he said. “I see all of us on the same side,” Jacobs continued. “I wish the governor had not done what he had done. Sales tax and $250,000 are a heavy lift. If one believes there’s a true movement around the 99%, ours is simple and direct.”
Just because the initiatives have been filed doesn’t mean that they automatically go into circulation. The state must create a title and summary for the bill before sending signature gatherers out into the field to collect signatures. The deadline for getting on the ballot in November is roughly the end of April, but title and summary won’t be completed until late January. That gives these disparate groups a couple months to find common ground.
And that is likely to be difficult. The California Federation of Teachers is a main sponsor of the progressive taxation ballot measure, and they certainly have the money to get on the ballot. So does the Governor, who you could easily see trying to strong-arm donors into only backing his initiative and steering money away from the others. Nicolas Berggruen is a billionaire and his initiative has the kind of centrist coalition that could easily bankroll something onto the ballot.
And aside from the jockeying over funding, there’s just a philosophical difference here. The progressive coalition believes their millionaire’s measure can pass, and that Gov. Brown’s cannot. “I’m glad the governor finally proposed something that includes some progressive elements. That’s a good thing. It’s too bad he did not choose real progress instead of a compromise,” said Jacobs.
One scenario Jacobs envisioned was one in which both his coalition’s measure and the Governor’s reached the ballot. “I’m not sure it would be bad,” he said. If they passed in tandem, you’re talking about $13 billion a year for California, enough to make a real difference in reversing the worst cuts of the Great Recession and creating bold new programs, like the funding of high speed rail or even a state-based health care system. “I could argue that with two of these on the ballot, it’s time to refund California. That’s a great thing,” Jacobs said.
But that’s not really the history of ballot measures in the state. If common ground isn’t reached, the multiple measures will invariably wind up in competition, even if they don’t conflict. And this hope of going around the minority veto on tax increases would be potentially undermined by differences of opinion.
More from KQED’s John Myers.