Advancing a Free Society

California’s Fog of Tax Initiatives

Saturday, November 26, 2011

History shows that, on the morning of Nov. 3, 2007, some 108 vehicles, including 18 big rigs, were involved in a massive pile-up along a two-mile stretch of northbound California 99, in southern Fresno.

As occurs often at that time of year in California’s Central Valley, a thick cover of Tule fog blanketed the area. Visibility was dismal.

Moreover, as is common not just in November but every day in California, motorists were disobeying the speed limit. The result: a massive chain reaction that could have been avoided if everyone slowed down and obeyed to law.

Another early November pile-up is headed California’s way in 2012. The bodies in motion: not automobiles, but ballot initiatives affecting California’s tax code.

That would include:

  • A proposal (details here) by Think Long California (Hoover’s George Shultz and Condoleezza Rice among its members) that would simultaneously cut taxes across the board and expand the state’s sale tax to include services.
  • A plan (still in the works) by Gov. Brown to tax the wealthy and up the state’s sales tax. Brown is banking on the California electorate repeating the pattern of earlier this month, when voters in local elections approved 40 of 53 measures to increase, extend or create new taxes, fees and bond measures. He’s also going against the gubernatorial grain: Brown’s predecessors (Arnold Schwarzenegger, Gray Davis and Pete Wilson) increased taxes – without the public’s stamp of approval. Brown, convinced he can’t coax a supermajority of lawmakers into a tax hike, must rely on vox populi.
  • A proposal (at this point, more of a threat) by the California Federation of Teachers to steam ahead with a 1% tax hike on incomes of $500,000 and above, unless the State Legislature does it first (which is highly unlikely, as legislative Republicans will refuse to be part of a requisite two-third majority). CFT (as, apparently, does President Obama on the campaign trail) thinks the Occupy movement has opened the door to a “people vs. the powerful” tax argument.
  • A proposal by Tom Steyer, a hedge-fund manager and head of Californians for Clean Energy and Jobs (a tech-enviro coalition that slayed last fall’s Proposition 23), to raise taxes on out-of-state businesses that maintain California-based offices and workforces.

That’s four separate measures, all addressing the state’s tax code, competing in the same limited space – and that, of course, is the California voter’s limited attention span.

So here’s the key question: can four tax increases (or even three, if the CTF measure is but a political bluff) get along at the same time?

The answer: probably not.

And here’s why:

  1. Think Long California released its blueprint on Monday, three days before the national holiday. It took the California Teachers Association all of one day to declare war on the reform effort – let’s call it: the teachers’ union way of giving “no thanks”. What has CTA up in arms? It’s Think Long’s suggestion that California eliminate the constitutional requirement to increase school funding in surplus years to compensation for prior education cuts (here’s the left’s assault). Think Long is chock-full of sensible ideas. It’s also an easy target for interest groups like CTA that have a history of defeating reform measures.
  2. Where does California’s governor figure into the ballot competition? Arnold Schwarzenegger, found better success toward the end of his term by choosing not to be the public face of ideas he supported (high-speed rail, redistricting reform), than he did earlier in his tenure as the “people’s governor” (specifically, his ill-fated special election in 2005). Does Brown campaign for his own tax increase, or hand it over to a friendly coalition of teachers’ and labor unions? Does he stay mum on Think Long, knowing he needs the teachers’ union to finance his ballot effort?
  3. Each measure likely would be attacked by conservative anti-tax groups as “helping” Sacramento – and ballot measures in November 2010 seen as bailing out lawmakers were punished. Will the same approach be as effective in 2012 (translation: same angry electorate, or is it time for anti-tax conservatives to modify their message and tweak their campaign tactics?
  4. The maturity of the political process. In 2009, California’s Commission on the 21st Century made this run at tax reform (indeed, some of the commission’s members were recruited for Think Long). The plan was too bold – i.e., rattled too many special interests’ cages – to ever have a chance. Is it time to admit that that the only real shot at serious political and policy reform in California means circumventing the State Capitol?
  5. Californians’ appetite for reform and working outside the system. As KQED’s Jon Myers discusses here, Think Long is the Golden State’s answer to the congressional “super committee” – a group of wise men (and women) trying to solve a problem clearly beyond the Legislature’s capabilities. So perhaps it’s not a coincidence that Think Long recommends a “Citizens Council for Government Accountability” that would be able to place its own laws and constitutional amendments on the ballot – without legislative approval. Yes, it’s circumventing a political system Californians don’t like. It’s also changes the balance of power in the Golden State – and the question of power grabs was at the heart of Schwarzenegger’s downfall in that ill-fated special election.

Cumulatively, it’s a lot of fog for Californians to navigate next November. Hopefully, voters will slow down and carefully consider the choices – lest a bigger accident occurs.