Monday, June 27, 2011

Jerry Brown, Democrats Abandoning Tax Hikes?

The Sacramento Bee reports that Jerry Brown is finalizing a new budget plan with Democratic lawmakers that could hit the floor of the Legislature as soon as tomorrow. Though presumably they'd be able to push it through on a majority vote as they did with the budget Brown vetoed just over a week ago, it's likely a solution that will leave the Dems fuming.

According to the Bee's Jim Sanders, the new plan suggests that Brown has, at long last, abandoned his plan for five more years of tax increases, and is trying to strike a deal for another majority-vote budget. Apparently, the new plan essentially replaces the legally questionable maneuvers from the last budget with . . . nothing. Lawmakers are going to assume that $4 billion more in tax revenues are on their way, and if they aren't, a mid-year provision will trigger cuts to education and other programs to make up the difference. If the report is accurate, California will be getting the Democratic Party's version of an all-cuts budget.

So what would this mean? Well, the new budget would most likely pass muster with Controller John Chiang, so lawmakers would get their salaries back. But more importantly, it would be a victory for the state's taxpayers, who will see income, sales, and use taxes fall by 1%, in addition to a decline in vehicle license fees. That's right: lower sales taxes just in time for the weekend! It says a lot about how overtaxed Californians are when such a moment is even cheered by someone from the Board of Equalization.

(UPDATE at 4:20pm: The plan is official, having been announced at a joint press conference involving Brown and Dem lawmakers this afternoon. Also of note, John Chiang says he will not weigh in on this budget if Brown signs it.)

(Also, assuming this passes, we will have to tip our cap to the crystal ball of Tim Cavanaugh.)

(UPDATE at 9:47pm: Hmm. Reading a more detailed breakdown, we're not sure this plan will work either. It retains three items from the last budget whose legality is questionable: clawing back $1.7 billion from redevelopment agencies, raising fees on homeowners who live in fireprone areas, and hiking vehicle license fees. On one hand, we're happy to cheer the death of the RDAs once again, but we're not sure the backfilling of state revenues will go through. The Amazon tax is also alive and well in the new proposal, despite the fact that California almost certainly won't collect $200 million in sales taxes from companies like Amazon and Overstock.)


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