Tuesday, August 30, 2011

Jerry Brown, Democrats, Unions Try to Determine Best Way to Take Your Money

Sometimes taking people's money without their consent is harder than it appears. As a case in point, observers of the protracted haggling over California's most recent budget will remember Jerry Brown's ultimately unsuccessful attempt to put five-year increases of income, sales, and vehicle taxes before voters. When the slapdash majority budget was signed into law, Brown promised to try again on tax hikes, this time targeting the November 2012 ballot. Yet, as the Sacramento Bee reports today, the Governor is having a hard time deciding, in concert with his employers in the organized labor community, on the best way to make those hikes a reality. And some of the union folks are getting nervous that they may run out of time to submit a plan.

In talks that the Governor describes as "herding cats," Brown and various labor unions are stuck trying to figure out what sort of tax package will take enough money out of private hands to satisfy them, while being popular enough to gain voter approval. While another plan to tax a broad swath of Californians might give Sacramento billions to spend, Brown isn't likely to go this route again, unless you think something will happen that makes such hikes more popular than they were in the spring. Union officials, of course, have been pushing a tax on California's wealthy, and Senate President Darrell Steinberg wants such a tax to be part of any proposal. Of course, no less a radical anti-tax conservative than Treasurer (and lifelong Democrat) Bill Lockyer has said that taxing the rich any more would likely push many of them out of California. Of course, the millionaire's tax alone wouldn't bring in nearly enough money, so it would need to be accompanied by taxes on businesses. Given the state's grim economy, these would be a tough sell, and would likely face stiff opposition from interests with deep pockets.

The more basic problem, of course, is one the Bee sidesteps: the argument for tax increases is very, very weak. If you tax private enterprise, the state's awful recession is more likely to continue. If you tax the rich, you lose some of the investment capital that creates the permanent jobs Californians are desperate for, and enough of them leave that you don't see nearly as much money as you expected. If you tax everyone, you probably lose your job, and you risk a middle-class tax revolt along the lines of Prop 13. Lest anyone forget, Brown is planning massive increases in government spending, starting with a $12 billion increase in the general fund budget next year. For all the Governor's rhetoric about "tackling the state's wall of debt," his actual plans would call for most of the new tax revenues to be thrown at new spending, including prisons and $20 billion in new bonds. Californians shouldn't be fooled. These proposals aren't intended to solve the state's chronic financial woes, and will only worsen them.


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