July 1, 2022

In California, a Push for Tax Increases on the 2012 Ballot

But faced with the prospect of withering budget cuts and deficits that stretch through at least the middle of the decade, that may be about to change.

A near glut of initiatives that would raise taxes are being aimed at the November 2012 ballot. A group of Republican and Democratic business leaders and former state officials calling itself the Think Long Committee for California is drafting an initiative to raise $10 billion by expanding the sales tax to services, while reducing personal and corporate taxes. Gov. Jerry Brown, a Democrat, and legislators are negotiating the details of an income tax surcharge on the state’s top earners and for a sales tax increase that in its latest form would raise $6 billion.

In addition, labor unions want voters to approve even bigger sales and income tax increases, and environmental groups last week proposed an initiative to close a business tax loophole that they said would produce $1.2 billion for education and energy projects.

There are so many plans out there that some Democrats are warning about tax initiative gridlock on the ballot.

It is highly unlikely that all these initiatives will qualify for the ballot, and Democrats say they are working to make sure that not all of them do. Not incidentally, California’s formidable network of antitax groups is not about to be caught off guard and is confident about beating back the efforts at the polls.

Yet the sheer abundance of undisguised tax-increase proposals is the latest evidence that spending cuts in California, arguably deeper and further along than almost anywhere in the country, may be producing a reconsideration among voters about taxes and the value of government. Democratic leaders said the tax campaign marks the start of the backlash that many of them, starting with Mr. Brown, had predicted would set in as budget cuts turned into the reality of closed parks, shortened school years, a reduced number of police officers on the streets and, in the case of California, the early release of felons from overcrowded jails and prisons.

A survey of California voters conducted from Oct. 30 through Nov. 9 by The Los Angeles Times and the University of Southern California found that 64 percent of all respondents said they would pay more taxes if the money went to public schools, with support for taxes high among Democrats and independent voters. And voters in local elections across the state approved a variety of bond and tax measures last month, raising taxes on businesses, hotels and property owners to pay for schools and to offset reductions in services that communities and the state have imposed during these difficult years. Those results are now being seen as a harbinger of next year’s election.

“You get a sense among people that enough is enough,” said Darrell Steinberg, a Democrat who is the president pro tem of the Senate. “And frankly, there’s no choice. These cuts have done real damage. I know that, as one leader, I am not interested in making any more cuts.”

Dan Schnur, the director of the Jesse M. Unruh Institute of Politics at the University of Southern California, which oversaw the poll, said the findings suggested that voters were open to a tax increase.

“The poll results largely reinforce the local election results we saw,” he said, adding that “voters are a lot less reluctant to raise taxes when they are convinced that the money is going to be spent in their local community.”

Leaders of the state’s antitax coalition said they were confident that voters would continue to oppose any increases, no matter the severity of the cuts being imposed. “It looks like a $10 billion tax increase, and I don’t think there’s any way on God’s green earth that voters will approve that,” Jon Coupal, the president of the Howard Jarvis Taxpayers Association, said of the Think Long Committee. (Mr. Jarvis, who was a leader of the Proposition 13 campaign in 1978, died in 1986.)

Still, the backers of the Think Long plan said they have $20 million to run a campaign for their initiative. The committee is a powerful assembly of California figures, which could give it extra credibility in the fight. The members include Eric E. Schmidt, the chairman of Google; Gray Davis, a former Democratic governor; Eli Broad, a prominent philanthropist; and two former United States secretaries of state, Condoleezza Rice and George P. Shultz, both Republicans.

The committee’s tax overhaul proposal, one of a series of reforms it is hoping to put before voters, is intended to produce about $10 billion annually to eliminate the state’s debt and return money to the publicly financed school and university systems. It would reduce personal and corporate tax rates, but expand the sales tax to services like those provided by lawyers and accountants.

The plan currently being discussed by Mr. Brown and Democratic legislators would raise about $6 billion with a temporary surcharge on the top 1 percent of wage earners and a sales tax extension, with the money directed to state prisons.

Some union leaders are pushing a similar plan that would raise closer to $13 billion. And a group of environmentalists, led by Thomas F. Steyer, the founder of Farallon Capital Management in San Francisco, has proposed an initiative to close a loophole that has allowed out-of-state companies to avoid paying an estimated $1.1 billion in taxes to California. That money would go to education and to make buildings more energy efficient, which backers say would create thousands of jobs.

Mr. Steinberg says his main challenge is to avoid overloading voters. “Our goal is to pull all these disparate efforts together into a solid, passable initiative,” he said. “Do I think the mood is right? I do. When you look at how the middle class has been squeezed — and you see it mostly around the higher education campuses — there is a recognition that you can only cut important investments so much.”

The pro-tax activity comes as an independent legislative budget analyst announced on Nov. 16 that revenues were falling dramatically below state leaders’ projections in passing a budget in June. Under the terms of that spending plan, if revenues fall short by at least $1 billion, up to $2 billion in spending cuts will take effect, including trimming the school year by a week. That report projected the state would face a $13 billion budget shortfall next year.

Proponents of tax increases here have been forced to use the initiative process because California law requires a tax increase to be approved by two-thirds of the Legislature, a legacy of Proposition 13, and Republicans have made clear they will not give Democrats the votes to cross that threshold. “The initiative process is one of the reasons California has issues, but it also allows changes to happen if the Legislature has difficulty acting,” said Nicolas Berggruen, a billionaire investor who is the head of the Think Long Committee.

Under a measure approved this year, all initiatives must appear on a general election ballot. Tax increase proponents have concluded that November 2012, with a high Democratic turnout expected in a presidential election, would be more favorable for these initiatives than in a nonpresidential year, when opponents of tax increases are considered more likely to vote.

“The November 2012 ballot is going to be the political equivalent of bumper cars,” Mr. Schnur said. “What we have seen historically is that voters who are overwhelmed or overloaded with things tend to vote ‘no’ on everything.”

Article source: http://feeds.nytimes.com/click.phdo?i=9cd5f356d7fb3e77b10c6eecc82bf3ff

Vermont Exercising Option to Balance the Budget

But Vermont, it turns out, is a fiscal goody two-shoes.

This spring, the Democratic-controlled Legislature toiled to close a projected $176 million gap in its $4.6 billion budget for the coming 2012 fiscal year with a combination of spending cuts and scattered tax increases. Gov. Peter Shumlin, a newly elected Democrat, said Vermont was so innately frugal that it had no use for a balanced-budget law.

“Vermont has more common sense than the 49 other states,” Mr. Shumlin said in a recent interview. “We pay our bills, live within our means and hold firm to the tradition of not spending more than we take in.”

But not everyone here is pleased about the thriftiness, especially when it means cutting services. State Representative Paul N. Poirier, an independent, said his colleagues should have raised taxes on the wealthy instead of cutting programs for the elderly, mentally ill and developmentally disabled.

“In the last three years, our little state of Vermont has cut over $300 million in direct services to people,” Mr. Poirier said. “Why not ask people who have done well during this recession to step up and pay a little more?”

Some wealthy Vermonters agreed, going so far as to publicly ask Mr. Shumlin to raise their taxes. In a letter last month, about 50 of them — including Ben Cohen and Jerry Greenfield, the Ben Jerry’s ice cream titans — beseeched Mr. Shumlin to “help meet basic human needs” by imposing a temporary income tax surcharge on the top 5 percent of earners.

Both the House and the Senate rejected the proposal. Mr. Shumlin, too, said thanks but no thanks.

“I’m very grateful to them for their generosity,” he said. “But we’re already asking a lot of our wealthy residents.”

Among other things, the planned cuts would reduce the number of substance abuse counselors in high schools and scale back programs that help elderly people stay in their homes and avoid moving to nursing homes. On Friday, the Senate approved a budget plan that would also increase the cigarette tax and raise taxes on health care providers.

State Senator Ann Cummings, the chairwoman of the Finance Committee, said that carrying over a deficit was unthinkable, partly because the state already anticipates a shortfall of $60 million in the budget for the 2013 fiscal year.

“It’s like charging groceries,” she said. “Once you start, if you don’t have a reasonable expectation that the money is going to be there, it’s just a snowball going downhill.”

Mr. Poirier and others who think the state is being too prudent point to the early 1990s, when Gov. Richard A. Snelling, a Republican, addressed a budget crisis in part by carrying over deficits for several years and temporarily raising taxes on income and sales.

“It really was a boon to be able to do that,” said Jack Hoffman, a senior policy analyst with the Public Assets Institute here, a liberal-leaning research group. “We worked our way out of the hole over time instead of making these really drastic cuts.”

Mr. Hoffman is among those who expressed frustration that Mr. Shumlin and legislative leaders have refused even to borrow from the state’s reserve fund, which currently holds about $55 million, to avoid service cuts.

“I don’t know what they’re waiting for,” Mr. Hoffman said. “I worry that we’re going to come through this recession, get to the other side and someone will proudly say, ‘We never touched the rainy day fund.’ ”

Others say that next year could be the biggest test of Vermont’s flintiness because the last of the federal stimulus money that has helped states survive the recession is scheduled to disappear.

As for why Vermont has never passed a law or amended its Constitution to require a balanced budget — something every other state has done, though some are looser than others in their definition of “balanced” — even the state archivist, Gregory Sanford, said he had no clue.

“There apparently has not been much of a clamor for one,” Mr. Sanford said in an e-mail after searching for evidence that anyone ever tried to propose a balanced-budget amendment here. Given the deep fiscal problems of some states that have such requirements, like New York and California, Mr. Sanford said, “I am not sure what the value of such an amendment would be.”

Former Gov. Jim Douglas, who left office in January after eight years, theorized that Vermonters would actively resist such a check if it were suggested.

“Vermonters like to think of ourselves as able to make sound decisions,” Mr. Douglas said, “without the heavy hand of a constitution or government forcing it.”

Article source: http://feeds.nytimes.com/click.phdo?i=44c39d78cfc8fccdee29e8e60e3d8b4e