Unions, however, are a long way from consensus on what to put on 2012 ballot
By Steven Harmon
Contra Costa Times
© Copyright 2011, Bay Area News Group
Posted: 07/09/2011 02:00:00 PM PDT
Updated: 07/10/2011 06:45:58 AM PDT

SACRAMENTO — Labor leaders were never overly enamored with Gov. Jerry Brown’s plan to extend taxes on purchases, income and auto fees, but were willing to go along with it to give the newly elected Democratic governor a chance to find revenues his way.

But with Brown’s plans now smoldering in ruins, his labor allies are moving to gain control of the debate over tax initiatives they hope to pursue in November 2012.

“I’m not sure which way we’ll go, but it won’t have a regressive sales or income tax on the middle class,” said Art Pulaski, secretary-treasurer for the California Labor Federation. “We’re going to want to look at a way to generate revenues that doesn’t put more burden on working folks.”

Brown’s calculation was to seek the path of least resistance, and a continuation of current taxes was the most acceptable to the broadest coalition, including large business groups that most feared taxes that would target particular industries.

Those days are gone. Labor is looking for a fight to reverse tax benefits they say have gone disproportionately to the wealthy for the past 30 years.

“The existing tax structure basically benefits the most wealthy of us, especially corporations and the most wealthy individuals, at the expense of middle class folks,” said Dean Vogel, president of the California Teachers Association. “For the last 20 years at least, with a two-thirds vote required to pass the budget, we’ve been trading tax breaks for votes that built a structural deficit. Nobody wants to talk about it, but it’s there. It’s a heck of a way of doing business.”

But labor groups are months away from settling on a unified approach to seeking new revenues. A number of labor and constituency groups have been in discussions for weeks, and intend to aggressively poll and test various tax proposals with focus groups through the summer before arriving at what they hope to be a consensus strategy by the fall.

A tax hike on the income of the wealthy may be the most popular. An emerging coalition of labor, health, social services and other constituency groups are mobilizing around a tax measure that would raise taxes on the top 1 percent of wage earners in California.

The California Federation of Teachers initially broached the proposal of a 1 percent hike on the top 1 percent. But as the teacher’s group and others tossed the idea around, they asked themselves: Why settle for 1 percent?

“We did polling, and it has huge support, so if we support an initiative for November, it would be more than 1 percent,” said Josh Pechthalt, president of the California Federation of Teachers. “I’m frankly not interested in something so minimal. I think 1 percent is much too low. It’s a misreading of where people are politically.”

President Obama’s agreement earlier this year to extend the Bush-era taxes was a 4 percent break for the top 1 percent, Pechthalt said.

“If we could capture that in California, that would generate $10 billion,” he said.

Other ideas floated by various groups include increasing corporate taxes, closing loopholes on corporations, or going after various industries such as oil and tobacco companies.

Brown said last month that labor might pursue a fix to 1978’s property-tax capping Proposition 13 to increase property taxes on businesses, otherwise known as a split roll tax. But labor groups appear to agree that the earliest they’d pursue that is 2014.

One potential ballot measure would impose a severance tax on oil companies, with revenues used exclusively for higher education. But that is unlikely to gain financial backing of the large labor groups not eager to provoke an arms race with oil companies willing to spend as much as $100 million in a campaign.

Brown is considering a 2012 tax initiative, but hasn’t made a decision on which direction he might take.

“He’s definitely looking toward 2012, but he has not signed off on any particular initiative, nor would he reveal his strategy in advance,” said Gil Duran, Brown’s spokesman. “It was shocking that people were denied a voice in the budget because of Republican resistance, but one way or another, the voice of the people will be heard.”

Republicans bridle at Brown’s contention that they were at fault for the failed talks. They say labor intentionally scuttled Brown’s plans to avoid having to relent on pension rollbacks and other concessions. Doing so would also delay elections until they could operate in the more favorable electoral climate of a presidential campaign, and it would give labor more time to market test the spectrum of tax options.

With labor groups pulling away from Brown’s broad-based approach, however, a split could emerge among the Democratic allies.

“Sure, it would be good for him to be a partner in this but that’s up to him to decide,” Pulaski said. “But I don’t think (a tax initiative campaign) needs the governor.”

A problem with labor groups driving the initiative process is that “if it’s too closely associated with the unions, it could be a liability because voters could see it as an exercise in self interest and not public interest,” said Jack Pitney, government professor at Claremont McKenna College.

Even as labor groups contemplate their options, the unknown is liable to trip up the best laid plans.

Brown may have to do a midyear budget correction in January, depending on whether the $4 billion in revenues that he projected arrive. If the revenues don’t come in, billions of dollars in cuts could be triggered. That may drive a renewed demand to raise revenues even earlier than November.

Brown’s next budget will be hammered out in the swirl of electoral politics.

Legislators will be running in newly drawn districts and in “top-two” primaries in June that could alter the discussion on taxes.

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