The high-stakes gamble that Governor Brown and the Democrat-dominated Legislature have foisted on the people of California continues to play out.
The governor, with lots of help from the attorney general and the legal system, has his tax increase proposal—Proposition 30—in the No.1 position on the November ballot. It calls for a tax increase on high-income earners (single people earning more than $250,000, twice that for married couples) for seven years as well as a one-quarter-cent increase in the sale taxes for four years. The bulk of the money is supposed to go to k-12 education, which is set for major cuts if it fails.
The school insiders, once the politics of kowtowing to the governor are put aside, liked Prop. 38 by attorney Molly Munger better. Her initiative proposes across-the-board income tax increases that are skewed more to higher earners. It has been reported that Brown adjusted his proposal once the pollsters tested the tax the rich proposition. To its credit, Munger’s approach includes across-the-board in income tax increases, while Brown’s just targets the so-called “rich.”
Of course, for true progressives, Brown’s reliance on sales tax does just the opposite—it hits those with smaller incomes equally with those with plenty of resources. It’s regressive in that way—as are all sales taxes.
What’s remarkable in the shell game that is the state budget is that the revenue assumptions are exactly that—assumptions or best guesses. A year ago, the budget was “balanced” when the revenue assumptions were raised by a phantom $6 billion. It never appeared, thus the budget finished in the red. It’s been in the red four years in a row—this year by $3.6 billion.
The current budget includes an increase in personal income tax—based in part on the passage of the governor’s initiative—of 13.3%. The increase in sales taxes for this year is predicted at 8.9 percent. The income tax also included an expected windfall from Facebook going public, an assumption that has gone seriously the other way. The total budget passed by the Legislature and signed by the governor increases spending by $9 billion or 10.4 percent.
Does that track with the economy you experience daily? How many of you are expecting a double-digit pay increase from your employer (yet alone a high single-digit bump), yet our elected leaders passed a budget again built on a house of cards that included the governor’s initiative—backed with millions of financing from the state teachers union and other employee unions.
It reflects the unholy alliance between the Democrat party and the public employee unions.
One of the challenges for the unions backing the tax plan is confusion with the Munger initiative. Polling shows Brown’s plan narrowly ahead while Munger’s is losing badly. She has invested nearly $30 million of her own money in the initiative—the question is whether she will abandon what appears to be a losing cause and support the governor’s plan, quit spending money or invest her money in backing the governor’s plan.
Watch carefully over the next month.