Jerry Brown’s Plan B
California Gov. Jerry Brown likes to talk about “loyalty to California.” For Brown, that means that public people should put aside their partisan interests to do what is best for the Golden State.
Last week, Brown failed his own loyalty test. He agreed to a deal to put a tax increase measure on the November ballot when he has to know that the new measure would exacerbate California’s dysfunctional finances.
Brown’s been trying to get a measure on the ballot ever since he was elected. This year, he proposed a “temporary” tax increase measure for the November ballot. The five-year Brown plan would have increased the sales tax by a half-cent while raising income taxes by 1 percent for single earners making more than $250,000 and by 2 percent for families earning more than $1 million.
Californians already pay the highest sales tax in the country. Only Hawaii has a higher income tax rate for the affluent — 11 percent, compared with 10.3 percent in California. Given the state’s heavy tax burden and voters’ 2-1 rejection of a similar measure in 2009, it does not seem likely voters would have passed Brown’s Plan A — except that it had two virtues.
One: In raising the sales tax, Brown would have made all Californians share some of the burden.
Two: Brown’s original plan would not have been nearly so problematic as the two other measures vying for the November ballot.
The California Federation of Teachers was pushing a “millionaires tax,” which would have increased tax rates on those earning $1 million by an additional 3 percent and would have raised rates an extra 5 percent for those earning $2 million or more.
Yes, that’s popular, but as Brown recently told the San Francisco Chronicle editorial board, CFT-style hikes are bad tax policy, as they add to Sacramento’s “roller coaster” of fat years in boom times followed by lean years when the economy goes bust. (Besides, it’s not as if the rich aren’t paying taxes. In 2007, the top 1 percent of earners paid 48 percent of state income taxes; in 2009, the top 1 percent paid 37 percent.)
Civil rights attorney Molly Munger has been pushing a third measure to raise income taxes on all Californians who earn more than $7,316. Munger’s plan doesn’t have the volatility problem, but it’s hard to imagine voters approving it.
Brown had been pushing the CFT and Munger to drop their measures and get behind his plan. He argued that if there are three competing measures, voters are likelier to reject all three. Then, on Wednesday, came news of an agreement. The teachers union would drop its measure. In return, Brown would halve his proposed sales tax increase and raise tax rates on the rich. Brown Plan B would add another 1 percent for single filers earning $250,000 per year and an extra 3 percent for families making more than $1 million.
I fear that Brown Plan B would drive golden geese out of the state. Sure, most families earning $500,000 or more aren’t going to move over a lousy $5,000, but moguls who make 20 times that and own multiple homes just might decide to migrate. And there go: all: their tax dollars.
Brown guru Steve Glazer told me, “We’ve tried to be very pragmatic about what can win and what can help the schools and public safety, and this was the best alternative.”
Clearly, the governor’s team saw this as the best deal, but I think the governor would have been better off fighting both the teachers union and Munger than opposing Munger only while pushing CFT-lite.
“I understand why he did it,” noted GOP strategist Rob Stutzman, but the business community, which was trying to work with the governor, now has reason to see Brown “basically by force of politics being driven back to the arms of labor.”
Make that big labor and the spend-happy Legislature.
Hoover Institution economist John F. Cogan noted that over the past 25 years, California has had liberal and conservative governors but one common trend: “Movement toward a welfare state of liberalized benefits, removing taxpayers from the rolls at the lower end (while) keeping tax rates high and ever-increasing regulation of business. We see the results. When you see these trends, what’s common? It’s the Legislature.”
Email Debra J. Saunders at [email protected]