Published October 22, 2012
Already among the most taxed in the nation, Californians will have to pay even more if Gov. Jerry Brown gets his way.
Faced with a $16 billion deficit, Brown is pushing a ballot measure next month known as Prop 30 that would increase taxes by up to 30 percent on those earning more than $300,000. Brown claims that unless voters pass the measure, dubbed the "millionaires tax," he'll cut the school year by three weeks to save money.
"It's either massive cuts to the schools and colleges or the most blessed, the most well-off paying 1 or 2 or 3 percent more," Brown told a group of supporters in Oakland.
With his proposal, Brown is taking a page from President Obama's playbook, appealing to middle- and lower-income voters to tax higher-earning residents. But public policy expert Dan Schnur is not convinced it will work.
"It's been almost 20 years since Californians went to the ballot and voted to increase their own taxes," said Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. "The decision for California voters is deciding, do we care enough about these services to pay more money for them? And before they can come to that point, they have to decide, even if we are willing to pay more money, do we trust the state government to spend it effectively?"
Brown said that if Prop 30 is voted down, "I'll manage the best I can." But he's casting it as a simple choice between closing schools and asking the well-off to pay more. "I will tell you and I'm telling you the truth. Everything I've seen in my lifetime tells me that the schools need more money and that the people who we're asking to pay can afford it," he said.
Brown's supporters, led by California teacher unions, have spent more than $40 million in advertising for Prop 30. Ads say "the plan asks the wealthiest to pay their fair share."
Their "fair share" means the top 1 percent will pay up to 13 percent of their salary in state income taxes -- or roughly one-half the state's income tax revenue. Other top earners, even if they're not in the 1 percent, could still face a slightly smaller tax hike. In all, Prop 30 affects roughly the top 400,000 of California's 14 million individual income taxpayers -- about 2.7 percent of the taxpayer population.
It also slightly raises the sales tax.
In over-taxed California, the proposal has drawn plenty of opposition. "We already rank number one in all 50 states in state sales tax and we have the second-highest income tax rate," said Kris Vosberg, executive director of the watchdog group, the Howard Jarvis Taxpayers Association.
Brown's approach with voters, of threatening education, doesn't sit well with opponents who dispute his claims. They say Prop 30 is really about paying off old debts and teacher pay increases, and nothing prevents lawmakers from spending the new revenue in other ways.
That explains why billionaire philanthropist and lawyer Molly Munger sponsored her own measure. Backed by $30 million of her own money, Prop 38 raises income taxes on all taxpayers, not just the wealthy. Households making over a million dollars would pay an average of $77,000, while those making between $25,000-$50,000 would average $54 extra a year. And unlike the Brown measure, all $10 billion a year must be spent on schools.
Since 2008, Munger says lawmakers cut school budgets by $20 billion, laying off 40,000 educators. California now has the largest class sizes in the nation and per-pupil funding fell from fifth two decades ago to 35th today. In 2010, California spent $9,375 per student, roughly 12 percent below the national average.
Schnur says Munger's competing initiative is causing problems for Brown, confusing voters and diluting donors.
"Governor Brown is fighting a two-front war here." he said. "On one hand, he's got fiscal conservatives who are arguing against an initiative to raise taxes. On his other hand, he has a more liberal alternative represented by Ms. Munger and her allies."
Polls show both measures are in trouble. Prop 38 is supported by roughly 40 percent of voters, while Brown's more popular measure has lost support every week and is now under 50 percent. Conservatives have just begun to actively oppose Prop 30.
"It's kinda like being given a choice between the gas chamber and the electric chair," said Vosberg. "Both are gonna be detrimental to our economy. They're gonna drive more businesses and jobs out of state."