Thursday, April 28, 2011

Food for Thought: What If Voters Reject Jerry Brown's Tax Extensions?

Let's review where we stand on Jerry Brown's proposal to close part of California's budget gap by extending income, sales, and other taxes for five more years. Republicans in the Legislature are balking at any increases, and negotiations have broken off. The Governor, for his part, is still pushing the extensions but holding to his promise to let the voters decide whether to implement them. Labor unions, lefty journalists, and some Democratic lawmakers aren't happy about this, and have started pressuring Brown to break his promise and pass the tax extensions through the Legislature, without consulting the voters. While it would likely be political (and economic) suicide for Brown to force higher taxes through the Legislature in the midst of a recession, he hasn't talked about what he'll do if the voters get their chance to speak on the tax extensions, and turn them down.

Don't do me like that, people!
And there are reasons to believe voters are in no mood for higher taxes. While the LA Times crowed about recent poll results suggesting voters had swung support behind Brown's plan, our analysis of the poll suggested that they're far more supportive of correcting the remaining gap with spending cuts rather than taxes. And today, the Public Policy Institute of California, hardly a conservative-leaning body, released the results of some polling that suggest the tax extensions are in trouble. According to PPIC, support for the special election is increasing, but solid majorities of the likely voters polled oppose increasing the state's personal income tax (66% of likely voters) or its sales tax (61%). To us, it sort of sounds like voters want the chance to say "hell no" to the increases. They did voice support (62% of likely voters) for increasing the top income tax rate, but this alone wouldn't bring in the kind of revenue Brown needs, and Republicans would almost certainly block it from reaching the ballot.

So what happens if Brown gets his special election, and voters turn down the tax extensions? We don't see any way around an all-cuts budget at that point. It's a fair guess that Democrats in the Legislature would push harder for what they want now: tax increases without voter approval. (Hmm. What's the best way of investing in pitchfork and flaming-torch futures around Sacramento?) But that would take time, and the state would likely be out of money before they could get them passed (assuming they could get them through). Oddly enough, given these poll results, it may be that hammering out an all-cuts budget at this point would be the responsible thing for Sacramento to do.


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