Brown administration to submit tax-hike initiative

AP News
Posted: Dec 01, 2011 6:41 PM
Brown administration to submit tax-hike initiative

Facing another budget deficit and the prospect of deep cuts to education, Gov. Jerry Brown plans to file a ballot initiative as early as Friday that asks voters to increase taxes on the wealthy and raise the sales tax by half a cent.

The initiative would be intended for the November ballot and would maintain a pledge Brown made during his 2010 gubernatorial race not to raise taxes without a vote of people.

A legislative source who had been briefed on the proposal but was not authorized to speak publicly told The Associated Press on Thursday the initiative would call for adding an extra 1 percent tax on individuals earning more than $250,000 a year.

Individuals making between $300,000 and $500,000 would be taxed an additional 1.5 percent, while those making more than $500,000 would be taxed another 2 percent.

Joint filers who earn more than $500,000 would face an extra 1 percent, those making $600,000 to $1 million would face an extra 1.5 percent, and those making more than $1 million would be taxed an additional 2 percent.

The combination of income and sales tax hikes would raise about $7 billion and expire in 2016.

The governor declined comment on his tax plan Thursday.

He did make a rare appearance before a joint legislative committee to press lawmakers for public employee pension reform, which he says is needed first in order to win public support for taxes. He wants to increase the retirement age, get local and state government workers to pay more toward their pensions and retiree health care, and place new workers into a hybrid plan that includes 401(k)-style accounts.

"Without pension reform, I don't think we'll have the credibility to ask people to do other things that are very much needed," Brown told lawmakers.

Brown's political adviser, Steve Glazer, would not confirm he administration was ready to submit the language for a ballot proposal but said the approach fits with the governor's budget philosophy.

"The governor continues to promote a balanced solution to the state budget that combines difficult cuts and efficiencies with adequate revenue that protects schools and public safety," he told the AP.

California is facing a projected $13 billion shortfall over the next 18 months. With tax revenue running behind projections, the budget passed last summer calls for automatic spending cuts after the first of the new year to higher education, public schools and some social services.

Brown, a Democrat, has been developing his tax plan in a series of closed-door meetings with his staff, labor leaders and Democratic lawmakers. He has argued since taking office that raising taxes is necessary in order to prevent further cuts to essential services such as public safety and schools. Among the options for school districts is slicing another seven days off the state's minimum 175-day school year, which already is five days shorter than before the recession began.

Earlier this year, Republicans blocked his effort to place a measure on the ballot as part of budget negotiations.

California has cut tens of billions of dollars in state spending since the recession began in late 2007 and sent tax revenue plunging. The state general fund this fiscal year is $86 billion, down from $103 billion before the recession.

Believe Him
Katie Pavlich

The additional revenue from the temporary taxes Brown proposes would be directed toward schools, which would in turn free money for other services. Brown's tax proposal would also seek to protect money the state is directing to local governments for taking on additional responsibility for thousands of lower-level criminals, many of whom would be incarcerated in county jails instead of state prisons.

The initiative's prospects at the polls will be far from certain if it qualifies for the ballot. The recession has thrown millions of Californians out of work, and several other groups also are planning tax-related initiatives, creating a logjam of confusing proposals.

One, for example, seeks to close a corporate tax loophole while another seeks to raise income taxes to generate $10 billion for schools.

Tom Del Beccaro, chairman of the state Republican Party, said voters turned down the last seven tax increase proposals and will do so again.

"These will be turned down as well because voters know better than Gov. Brown," Del Beccaro said in a statement.

Also Thursday, Moody's Investors Services issued a report saying midyear cuts to California schools could lead to credit downgrades of some districts, particularly those with low reserves.

Dari Barzel, vice president and senior credit officer, wrote in her report that a total of 21 school districts have been downgraded by Moody's so far this year and seven remain on negative outlook.