Brown Sets State Up For Tax Vote

JAN. 4, 2011

By JOHN SEILER

In his inaugural address Monday, new (and past) Gov. Jerry Brown spoke eloquently of past Californians, including his great-grandparents, who overcame tremendous obstacles to build our state:

The people of California have not lost their pioneering spirit or their capacity to meet life’s challenges. Even in the midst of this recession, Californians this year will produce almost two trillion dollars of new wealth as measured by our state’s domestic product.

His speech largely was thematic, leaving the hard numbers-crunching to his budget proposal, which will be released in a few days. Yet the speech was a set-up for the main element of his budget proposal, according to early reports: tax increases. So it was significant that he reiterated a major campaign promise, “no new taxes unless the people vote for them.”

That sets the stage for a June vote on extending ex-Gov. Arnold Schwarzenegger’s $13 billion in tax increases, which were passed two years ago by the Legislature. The main levies then were a 1-cent increase in the sales tax and a 1 percentage point increase in the income tax, putting the top rate at 10.55 percent for millionaires; but even the second-highest rate digs in at a staggering 9.55 percent for the middle-class.

Brown is famously enigmatic. Does he really believe voters would approve such tax increases — even though they already voted in May 2009 against extenting those tax increases, and just last November 2010 voted against imposing different new taxes?

Even if the tax increases pass and amount to around $13 billion, that would mean $15 billion in budget cuts still would be needed to erase the $28 billion deficit. Will he first try to get that $15 billion in budget cuts passed by the Legislature as an indication to voters that he’s serious about ending the budget deficit, encouraging them to vote yes to raise their own taxes?

We’ll soon find out, because the Legislature just might not go along with him.

“I think that the speech was about as good as one could reasonably hope for,” Jack Pitney told me; he’s a professor of American politics at Claremont McKenna College and the author of “The Art of Political Warfare.”

Pitney continued:

He bluntly recognized the need for deep budget cuts.  Even so, he attached verbal parachutes to his bold words.  Pension reform, he said, had to be fair to the workers and taxpayers alike.  Fine, but what does that really mean?

Inaugurals are about hope.  Budgets are about choices.  When he releases his budget, we’ll get a better picture of the course he’s choosing.

Brown himself said:

No more smoke and mirrors on the budget. No empty promises…. With your help, that is exactly what I intend to do. The budget I present next week will be painful, but it will be an honest budget.

We’ll see on that one, too. But that statement is an implicit dig at Schwarzenegger, who was sitting in the inaugural audience and whom Brown earlier had praised. But Arnold spent his last several budgets using more “smoke and mirrors” than were flashed in the special effects of his action movies.

Energy policy

Brown has been a big backer of AB32, the Global Warming Solutions Act of 2006. It mandates a 25 percent reduction in greenhouse gases produced in California by 2020, just nine years from now. It also sets up an elaborate “cap and trade” system, managed by California Air Resources Board Chairman Mary Nichols, whom Brown is keeping in that post. She actually was appointed to the position by Brown way back in 1978, so there’s a symbiosis between them.

In his inaugural, Brown said:

As Californians we can be proud that our state leads the rest of the country in our commitment to new forms of energy and energy efficiency. I have set a goal of 20,000 megawatts of renewable energy by 2020 and I intend to meet it by the appointments I make and the actions they take. There are hundreds of thousands of new jobs to be created if California regulatory authorities make sensible and bold decisions. It will also be necessary to make sure that our laws and rules focus on our most important objectives, minimizing delays and unnecessary costs.

I will meet not only with the leaders of energy companies but with executives from a broad range of California business and industry to work on common problems and break down barriers that hold us back.

But the real question haunting the state is whether the doom-sayers are right in saying that AB32 will kill up to 1 million jobs. That’s something else we’ll soon find out about.

In November, California rose to the dubious position of having the second-highest unemployment in the nation (tied with improving Michigan), behind only Nevada. If California becomes number one in unemployment, then Brown’s soaring rhetoric will sound hollow to those pushed into unemployment lines by AB32. And an even worse economy only will make the budget crisis difficult to solve.

Partisan bipartisanship

Although Brown can be humorous, he isn’t know for that trait. Yet perhaps he was pulling California’s leg with this statement in his inaugural:

The budget I propose will assume that each of us who are elected to do the people’s business will rise above ideology and partisan interest and find what is required for the good of California. There is no other way forward. In this crisis, we simply have to learn to work together as Californians first, members of a political party second.

But in the November election, Democrats won every statewide elected position. And they passed Proposition 25, which dropped to a majority from two-thirds the threshold for passing a budget. So that makes the Republican minority irrelevant for passing a budget.

Brown, as noted, has precluded passing a tax increase without a vote of the people. But suppose he changes his mind? Doesn’t the state Constitution still require a two-thirds vote for passing a tax increase in the Legislature?

Maybe not. Ballotopedia notes:

One main argument made by opponents of Proposition 25 is that regardless of the claim of its supporters that it would not allow taxes to be hiked without a supermajority vote in the state Legislature, there’s a “poison pill” provision in the language of Prop 25 that actually would allow tax increases to be enacted with a simple majority vote….

Steve Merksamer, attorney for the opponents, says that the “notwithstanding any other provision…” clause means that Prop 25 is “a fraud on the voters.”^[3]

So, who knows?

California Dream?

Brown spoke warmly about his great-grandfather, who braved crossing an ocean from Germany, then the American continent, to make his fortune in California. That’s the pioneer spirit we all love to hear about.

But August Schuckman never had to pay a state income tax; might have paid even a federal income tax only during the Civil War; and never had to deal with the California Air Resources Board, AB32, Cal-EPA, the DMV, powerful state-employee unions, and his share of a $28 billion budget deficit.

The sad thing is that, except for the Silicon Valley geniuses and the Hollywood illusion makers that Brown mentioned in his speech, and a few others, the California Dream has been replaced by expensive housing, a morass of regulations, scarce high-paying jobs and for many, unemployment lines. Nothing he said is likely to do tomorrow is going to change that.

John Seiler is a reporter and analyst for CalWatchDog.com. His email: [email protected].