Battle Over the Tax Measure Sees Governor Pitted Against Progressives


In a meeting this week with the San Francisco Chronicle’s Editorial Board, Governor Brown threw down the gauntlet, arguing that his tax initiative was the only one that would solve the state’s fiscal crisis and increase funding to schools and higher education.

The Chronicle reported, “He said that one of the other tax proposals, known as the millionaires tax, might poll well because it would hit the wealthiest Californians and dedicate money almost exclusively to education, but that it fails to consider the effect of Proposition 98 – the state’s education funding guarantee – and amounts to ‘ballot-box budgeting’ that creates more problems than it solves.”

“You can’t look at an initiative in and of itself – it is a piece of the state budget,” he said of the proposal.

“It’s not good for schools, it’s not good for public safety and it’s not good for public confidence, because we go through all this and end up exactly in the mess where we started,” Governor Brown argued. “People will be angry because they voted for this and nothing happened.”

Those backing the millionaire’s tax responded on Twitter that the governor’s tax proposal would slash services by another $2 billion even if the measure passed, and if it failed, funding to public schools would be slashed by another $5 billion.

The energy in this state is coming from young people, who gathered in large numbers at the Capitol early this week to support the millionaire’s tax.

One of those was Charlie Eaton, speaking on behalf of a group called ReFund California, which is “a statewide coalition of homeowners, community members, faith leaders and students working to make Wall Street banks pay for destroying jobs and neighborhoods with their greedy, irresponsible and predatory business practices.”

“It’s no secret for about the last ten years in California,” he added, “it’s students and workers who have paid.”  He cited 300% tuition hikes and massive cuts that have cost jobs for workers.

While the workers and students have suffered, Mr. Eaton argued, “At the same time, corporations have not been paying – the one percent has not been paying for education.  They’ve had tax cuts.”

“Now we need the folks in Sacramento to stand with us and support making the one percent pay,” Mr. Eaton said citing the millionaire’s tax as the ‘concrete alternative’ for making the one percent pay.  “It’s really time for the politicians in Sacramento to stand up with us and support that.”

Others like Van Jones stood up for the younger generation, and said that his generation was throwing them under the proverbial bus.

“We are pulling the ladder up behind us and we have got to start putting the ladder back down for these young people,” he said.  “We have young who are graduating every spring off a cliff into no jobs in the worst economy since the Great Depression with unbelievable amounts of student debt.  It’s not fair to them.”

“I am so proud that these young people have begun to try to change the conversation and bring us back to what made California great,” Mr. Jones added.  “California is great because we invested heavily in education and infrastructure.  All the things that have made this state such an easy place to do well [in] and to get wealthy.”

“It is time for wealthy people in California who have been drinking from the well to start replenishing that well.  You can’t just take take, take from California and not give back,” he said.  He argued that the millionaire’s tax would put six billion dollars back into education.

But not everyone agrees.

Dean Vogel, a Davis resident, heads up the California Teachers Association, and this week he issued a statement that pointed out critical and fatal flaws in the millionaire’s tax that he believes will make things worse for public education.

“Despite a catchy title that certainly has some appeal, the Millionaire’s Tax initiative has some unintended consequences that will only make matters worse for funding public education and essential public services in California,” Mr. Vogel said.

Last month the CTA broke with the California Federation of Teachers, to support the governor’s proposal.

He added, “The governor’s initiative is the only proposal that will help close the current budget deficit, restore funding to education, and pay for services shifted to local cities and counties. Without the governor’s fair-share tax on the wealthy, the state is facing a $12 billion to $13 billion shortfall over the next 18 months, and more cuts to schools and colleges.”

One of the biggest concerns is that, with two and possibly three competing tax measures, the voters will become confused.

Mr. Vogel noted this potential problem, stating, “CTA is equally concerned that all the research shows that having three funding initiatives confuses voters and weakens support for raising the revenues our students, schools and communities desperately need.”

He argued, “It’s time for everyone to come together and support the only initiative that is designed to put our state back on the road to recovery. Governor Brown’s initiative will do just that. His proposal to tax the wealthy has the support of CTA and other labor, community and business groups, which is the type of widespread support it is going to take to pass any funding initiative.”

The bottom line for Mr. Vogel and others is, “Unless we all get behind this initiative, everyone loses.”

Millionaire’s Tax versus Governor’s Proposal

The California Budget project has compared the three major measures that have been filed and examines what they tax and the extent to which they help narrow the state’s budget gap.  We will compare the governor’s proposal to the millionaire’s tax.

According their report, “The Governor’s Proposed 2012-13 Budget identifies a $9.2 billion budget gap and offers $10.3 billion in ‘solutions’ to close the gap and provide a modest reserve. Both the Legislative Analyst’s Office (LAO) November five-year forecast and the Department of Finance’s (DOF) ‘baseline’ forecast that underpins the Governor’s Proposed 2012-13 Budget project continued shortfalls over the next five years absent additional spending reductions, revenue increases, or a combination of both.”

“A key consideration in evaluating potential ballot measures must be the extent to which they do, or do not, help bring the budget into balance and limit additional spending cuts,” they note.

According to their analysis, “The Governor’s Budget summary assumes that $2.5 billion of the 2012- 13 revenues would go towards the higher school funding obligation and $4.4 billion would be available to help close the budget gap.”

“The LAO estimates that the revenues raised by the high-income tax rates would be significantly less than the amount assumed by the Governor. Specifically, the LAO estimates that the Governor’s measure would raise $4.8 billion towards the 2012-13 Budget. The LAO does not estimate how much of the additional revenues would increase the Proposition 98 guarantee, but does note that, ‘the effect of the temporary tax increases would more than offset’ the state savings generated by the exclusion of the realignment sales tax revenues.”

They add, “More than half of the revenues raised by the Governor’s proposal would come from the top 1 percent of state income taxpayers, while all Californians, including businesses, would pay the higher sales tax rate.”

The millionaire’s tax would “permanently add two new rates to the state’s personal income tax: an additional 3 percent on income in excess of $1 million but not over $2 million and an additional 5 percent on incomes of more than $2 million (the 1 percent mental health tax rate would still apply in addition to the two new rates).”

The LAO estimates that the proposal would raise about $6 billion in 2012-13 and $4 billion in 2013-14. The DOF estimates that the measure would raise $9.5 billion in 2012-13 and $6 billion in 2013-14.

In addition, these funds would be over and above Proposition 98.

According to the CBP: “It appears that the state would still be obligated to increase school funding as required by language included in the budget agreement. The CFT measure would not directly help close the budget gap, leaving the state facing a $9.2 billion shortfall over the next 18 months and continued gaps thereafter. To close the gap, the Legislature could potentially reduce funding to the UC and CSU or suspend the Proposition 98 guarantee to achieve savings.”

They add: “Significantly, the Legislature could not direct the expenditure of funds for children’s and senior services, including funds that go to support services wholly or primarily funded by the state or where state laws establish the framework for programs and services, such as SSI/SSP; CalWORKs grant levels and time limits; Medi-Cal benefits and co-payments; and Healthy Families.”

The CBP concludes: “Finally, due to provisions of the State’s Constitution that require the state to reimburse local governments for a ‘new program or higher level of service,’ the Legislature could not require counties to use the additional revenues to backfill particular programs or services. Moreover, the CFT measure states ‘funds…shall not be subject to appropriation, reversion, or transfer by the Legislature, the Governor, the Director of Finance, or any other state official or agency.’ “

—David M. Greenwald reporting

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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  1. E Roberts Musser

    The comparison of the two proposed tax measures is as clear as mud to me. It appears the Gov’s proposal is very flawed, or am I missing something?:
    [quote]Both the Legislative Analyst’s Office (LAO) November five-year forecast and the Department of Finance’s (DOF) ‘baseline’ forecast that underpins the Governor’s Proposed 2012-13 Budget PROJECT CONTINUED SHORTFALLS over the next five years absent additional spending reductions, revenue increases, or a combination of both.”[/quote]

  2. medwoman

    I am very confused and have a request.
    I would like the equivalent of a “state budget and funding for dummies” summary of what these measure would actually do and what it might mean for the state. Maybe one of you who actually understands numbers could take this on. Rich, Don…. Are you up for it ?

  3. wdf1

    This is from the CA Republican Assembly Caucus website ([url][/url]). This is the year over year spending between the 2010-11 and 2011-12 budgets:


    Although the Republicans are kind enough to point this out, I’m not sure that they’ve had their hearts behind the cause. I personally agree with a certain amount of welfare spending, but I also think that accessible public education is the best way out of welfare.

    1. Frankly

      “Accessible public education”? What does that mean? Are you now trying to make a point that public education is not accessible?

      The principles of victimology are fascinating to me as one does not need real facts, only to cement an emotional trigger that in turn allows them to continue to make false and irrational statements and have them appear polished and intellectual.

      The message is “students and teachers are victims of ____” (fill in the blank with any opposition to collectivist ideology)

      The REAL fact is that public education is completely accessible… in fact so much that you only need to come to this country illegally to get it. The other real fact is that it largely sucks and both students and teachers are victims of the very system that enslaves them.

  4. hpierce

    We need teachers who can teach their students HOW to learn, and to think for themselves. I’ve seen little of these in the Davis public schools over the years,

    1. Frankly

      Agree. And we continue to move further and further away from it. The scapegoat is NCLB… but NCLB was implemented precisely because education outcomes were so bad.

  5. wdf1

    hpierce: [i]We need teachers who can teach their students HOW to learn, and to think for themselves. I’ve seen little of these in the Davis public schools over the years,[/i]

    What have you seen that makes you think this? What would you expect to see in your ideal world?

  6. Problem Is

    [quote]“We need teachers who can teach their students HOW to learn…”[/quote]

    First, you need parents who teach their children how to learn and are committed to doing the work involved in learning, BEFORE the student shows up in the teacher’s classroom…

    [b]Like the Good Old Days[/b]
    How about parents who shut off the TeeVee for themselves and their children, both learn to read a book, think, ask and answer questions.

    What a wonderful world it would be…

  7. wdf1

    medwoman: [i]I would like the equivalent of a “state budget and funding for dummies” summary of what these measure would actually do and what it might mean for the state.[/i]

    I haven’t read deeply for all three initiatives, though I know some possible useful links.

    Here is a link ([url][/url]) that is a quick resource for comparison.

    And here are links to

    Governor’s proposal, full text ([url][/url])

    “Millionaires’ tax website ([url][/url]), full text ([url][/url])

    “Our children, our future” (“Munger”) initiative website ([url][/url]), full text ([url][/url])

  8. wdf1

    And then there were two. Sac bee article ([url][/url]) today explains that Jerry Brown modified his proposal so as to bring the “millionaires’ tax” proponents on board. That leaves the “Munger” initiative as the only rival. The California PTA is supporting the latter.

  9. Frankly

    What I have learned in my years debating educated lefties on the problems with taxation come down to this:

    They think we are far away from the high point of the Laffer Curve.

    And that, in a nutshell, identifies the voting public “education” challenge coming from true fiscal conservatives. Higher taxation at some level has economic consequences that harm the very people that it portends to help.

    But I think we don’t have a ready platform to provide that education. Because left ideology is built on emotive, not rational, arguments.

    The tax and spend lovers think that enterprising and high-earning people like money so much that the pubic has tax raising capacity. They think we can take more from successful people before those people decide it is no longer worth it.

    Unfortunately, I think they are at least partially correct. For example, I’m still working hard to make more money even though I get the crap taxed out of me. I see high earners still working hard to maintain their lifestyles. I routinely work with bankers and real estate brokers in the LA area and about 50% of them are registered Democrats. Most of them are in debt to their eyeballs trying to live the life of a high-earner. They are not giving up even as tax rates put them farther in debt. In some respects these are the new slaves. They are stuck in the rat race to try and get well-off. Until they absolutely give up the pursuit, the tax increase advocates have a point.

    But tax rates are certainly impacting new projects starts and businesses on the margins. It is also causing more reserved investment in job-producing business… basically the more difficult after-tax profitability is, the less new business growth we will see.

    I love the fact that the widely reported growing income gap does not factor taxes or government transfer payments to individuals. So, no matter how much we take from hard-working successful people to give to unsuccessful people it will not impact the wage gap.

    A person has to make his own income for it to be counted.

    And he has to have a job or a business to make his own income.

    And we have absolute proof that the current trend for higher taxes correlates with depressed jobs and lower business starts/growth.

    So, higher tax rates mean a stagnant or growing income gaps.

    And frankly, I think my educated friends on the left like for there to be a reportable large wage gap. And all the partially educated, but inexperienced, young people don’t get the “bite the hand that feeds it” reality. They think the hand that will feed them is government. But government is only feeding them enough to keep them hungry for more… and the “food” is not produced… it is taken from the very people they seek to punish in a misguided class war.

    So, it is only when enough people stop pursuing taxable wealth that we get a platform to start the education. That is the Atlas Shrugged plot. I believe it is starting and will unfold with as the true pain of Obamadontcare kicks in, and government raises taxes yet again. Certainly the lack of job growth and business starts is evidence.

    And the initial response will be for the looters and moochers to start complaining about the producers not doing enough. And the producers will have no choice (other than submitting to voluntary slavery) but to check out and let the country, states and cities become completely fiscally insolvent.

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