Brown may seek new tax increases on 2016 ballot

taxesCalifornia lawmakers have left Gov. Jerry Brown in the lurch.

That was Brown’s judgment of the Legislature’s performance, which has left his administration with substantial unfinished business heading into the election year. The consequence may be a fresh round of tax increases.

Special session blues

Frustrated with the meager results of the special legislative session he called this summer, Brown unleashed a series of vetoes against increased credits and benefits, especially for lower-income residents. Among the nine pieces of legislation Brown denied were “bills that won near unanimous support in the Legislature that would have offered tax breaks for food bank donations, veterans seeking employment and energy- and water-efficient appliances,” as the San Jose Mercury News reported.

Brown even torpedoed six unanimously improved reforms of the California Public Utilities Commission. The beleaguered agency has been subject to investigation by the state attorney general and the U.S. attorney’s office in San Francisco, according to the Sacramento Bee. “Taken together there are various technical and conflicting issues that make the over 50 proposed reforms unworkable,” Brown wrote of the bills, the Bee added. “Some prudent prioritization is needed.”

Losing revenue

But Brown’s approach alone could not resolve California’s outstanding budgetary challenges. At the heart of Brown’s raft of vetoes was the Legislature’s inability to restructure the so-called managed care organizations tax, which affects health plans participating in the Medi-Cal program. “Last summer, federal officials decreed that California’s managed care organizations (MCO) tax will no longer be allowed after 2016,” as KQED noted. “But reworking the MCO tax proved to be no easy task this summer,” with Republicans unwilling to hike taxes and Democrats unable to sweeten the deal for the GOP. “Without the extension of the managed care organization tax that I called for in special session,” Brown said in his message explaining his veto of the nine bills, “next year’s budget faces the prospect of over $1 billion in cuts.”

Disgruntled Democrats

In a sharp political irony, legislative Democrats suffered more than Republicans as a result of Brown’s fiscal retribution. Each of the bills vetoed was authored by members of his own party, who decried his decision to shoot down what the Mercury News described as “only modest tax credits” that would “cost the state relatively little.”

“Brown even vetoed Senate Bill 199, authored by Sen. Isadore Hall, D-Compton, which sought to provide blind, disabled Californians with assistance completing financial documents and would have cost the state $3 million annually — a minuscule fraction of California’s $117.5 billion budget.”

The MCO tax was not the only issue on which Brown and lawmakers parted ways. “Republicans rejected Brown’s road repair funding proposal, whose GOP-friendly components, such as streamlining CEQA [the California Environmental Quality Act] and using cap-and-trade money for roads, couldn’t overcome the minority party’s aversion to higher gas taxes and a new road fee,” the Sacramento Bee noted.

Resorting to the ballot

Although unlikely, Brown’s frustrations could yet find an outlet this year. Technically, the special session has not actually ended, leaving legislators a few more months to grope for consensus. “The lawmakers have pretty much checked out of Sacramento for the year and aren’t scheduled to return until Jan. 4,” however, as George Skelton observed at the Los Angeles Times.

But some analysts have surmised that Brown could take tax increases directly to the voters next year, when the ballot will include a flotilla of proposed hikes. “Labor, health groups and children’s advocates are already working to place tax issues on the November 2016 ballot,” the Los Angeles Daily News reported. CSU Fresno professor Jeff Cummins suggested to the paper that “if Brown is unable to broker a deal with the Legislature, the governor may have to go through the ballot box as he did in 2012 to persuade voters to pass temporary sales and income taxes in Proposition 30.”

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