The financial crisis has passed and the economy is rebounding, but the fight over taxes is about to resume between Governor Jerry Brown and members of the California legislature. (Max Whittaker/Getty Images)
Juliet Williams | AP
January 25, 09:16 AM
Gov. Jerry Brown orchestrated the successful push for temporary sales and income taxes on Californians three years ago to help ease the state out of recession and close a multibillion-dollar budget gap.
The financial crisis has passed and the economy is rebounding, but the fight over taxes is about to resume.
The Proposition 30 taxes are supposed to phase out by 2018. However, social welfare groups and Democrats in the Legislature, eager to expand programs that suffered cuts during the economic downturn, already are eyeing an extension, along with a host of other taxes, from extending sales taxes to services, increasing taxes on oil and tobacco, and even restructuring Proposition 13 that strictly limits property taxes.
They are likely to meet resistance from Brown. Since returning to Sacramento four years ago, the 76-year-old Democrat has successfully positioned himself as a fiscal moderate with a firm hold on the state’s check book, an image that propelled him to another term that began this month.
He sold Proposition 30 to the voters as a temporary bridge to lead the state out of recession with a quarter-cent sales tax through 2016 and higher income taxes on income above $500,000 through 2018. Labor-allied groups want to extend the tax, which is forecast to bring in more than $7 billion this year, but Brown has repeatedly said he still views it as a temporary measure.
He’s also steered clear of discussions about taxing oil production and expressed skepticism about a proposal from Sen. Robert Hertzberg, who wants to extend the sales tax to services.
“Taxing new people is always difficult,” Brown said this month. “If you tell people that their Pilates class will be taxed at 8.5 percent, they may not be as yoga-happy as they were before.”
Democrats and Republicans agree that California’s overreliance on income tax creates volatility, leaving the state dependent on a handful of millionaires and billionaires. But they usually do not agree on what to do about it, and the impetus for reform often disappears when the budget stabilizes.
Betty Yee, the new state controller and former member of the state tax board, said the economic rebound makes this a good year to talk about reforming California’s tax structure. She said she plans to bring divergent groups together to study the various proposals, but said she believes overhauling the state’s tax structure would be a better long-term solution than the piecemeal efforts.
“With all the budget cuts that have taken place, you have all the interest groups that are looking for their own revenue source,” she said. “There’s going to be a tension between those proposals and the various interests and programs that will be supported by them, against our ability to really pursue comprehensive tax reform.”
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