John's May Revise Predictions

John Seiler:

Gov. Jerry Brown next Monday will produce his May Revise to his January Budget proposal. Here are my predictions.

The base line is that the January proposal included $12 billion in tax increases. Republicans have balked at that.

So, here’s what he’ll do:

1. Incorporate the recent $4 billion surge in revenues due to the economic recovery (such as it is).

2. Find another $2 billion in cuts and budget shifts. Then he can say, “See, we’re cutting even deeper.”

3. That will leave $6 billion in tax increases that he will call for.

4. Use a different mix of tax increases. In January, he proposed primarily increases in the income, sales and car taxes. All hit the middle class hard.

For the May Revise, he’ll include some combination of the following tax increases totaling $6 billion:

A) A higher income tax on the rich: those making more than $250,000 a year. (Which actually still is middle-class in expensive California; but never mind.)

B) An oil severance  tax. He’ll say, “Oil companies are making record profits. They can afford to give a little more back to the community.” He would ignore how the tax would just be passed on to consumers as even higher prices at the pump.

There already is an initiative circulating to put such a tax on the next statewide ballot. It would impose a 15 percent tax on oil production, raising up to $3 billion, to fund state universities and colleges. Brown could co-opt that proposal for the general fund.

C) A higher car tax. Brown and the Legislature already are postponing the date DMV renewal notices are sent for license plates expiring in July. So it’s obvious he still wants this tax.

The first two taxes — on rich folks and oil — have been supported by voters in recent polls. The car tax remains unpopular, but could be sold as part of a “soak the rich” package in which “we all must do our share to save our schools, our teachers, and public safety.”

5. Cut the length of the tax increases from five to two years. That length worked for Schwarzenegger’s tax increases two years ago. Five years is just too long.

6. Push the package through the Legislature this summer. That would mean he would need four Republican votes, two in each house. He’ll probably get them, promising pork and budget reforms. It worked two years ago for Arnold, who had to grab six Republicans for the tax increases, not four.

7. Get the government-worker unions to conduct the biggest scaremongering campaign you’ve ever seen to push the package of tax increases into law. We’ll be told that not only will the sky be falling, if the tax increases aren’t imposed, but all the doomsday prophecies about 2012 being the End Times will strike a year early.

Next Monday, we’ll see if I’m right.

MAY 11, 2011