CDCAN REPORT #195-2011: Governor seeks ballot initiative for $7 billion in temporary tax increases

GOVERNOR BROWN TO SEEK BALLOT INITIATIVE $7 BILLION TEMPORARY TAX INCREASE FOR NOVEMBER 2012 BALLOT

Proposes Five Year Temporary Income Tax Increase on Wealthy Californians and 1/2 Cent Temporary Increase In State Sales Tax - Funding Would Be Dedicated for Education and Public Safety

SACRAMENTO, CA (CDCAN) [Last updated 12/05/2011 03:00 PM] - Governor Brown will seek to place on the November 2012 general election ballot an initiative that proposes to raise $7 billion through a combination of temporary tax increases on the wealthy and a temporary increase of the state sales tax, targeting the increased revenues specifically for education and public safety and "not to other programs we cannot afford."  The Governor did not specify what those other programs were that the State cannot afford.

The Governor said he would file his proposal with the Attorney General today - the first step in a long process to qualify, via signatures, a ballot initiative.

With California facing an enormous projected on-going budget deficit by the end of June 2012 of $13 billion, the proposed initiative will be one of several ballot measures expected for the November 2012 ballot calling for different proposals to increase State revenues.

Brown made the announcement today in an "open letter' to Californians on his website, saying that "...the stark truth is that without new tax revenues, we will have no other choice but to make deeper and more damaging cuts to schools, universities, public safety and our courts."

Brown said that"...fewer than 2% of California taxpayers will be affected" by the temporary five year income tax increase on the wealthy and that even with the 1/2 cent increase in the state sales tax - that tax will still be lower than what it was six months ago.

The Governor said he was filing the initiative today - rather than going through the Legislature - because "...I don’t want to get bogged down in partisan gridlock as happened this year [during the 2011-2012 State Budget process]." adding that "The stakes are too high," and while his proposed initiative "...will not solve all of our fiscal problems...it will stop further cuts to education and public safety."  Calling his proposal "straightforward and fair", his revenue increase proposal would do the following: tax.

• Proposes that the new revenues be spent only on education and public safety
• Wealthy Californians - millionaires and high-income earners will pay up to 2% higher income taxes for five years.
• No family making less than $500,000 a year will see their income taxes rise. In
• There will be a temporary 1/2 cent increase in the sales tax.

Impact of Governor's Proposal on 2012-2013 Budget

• It is not clear yet how the Governor's proposed revenue increase will impact the Governor's 2012-2013 proposed state budget when he releases it January 10, 2012 in terms of overall spending reductions that many expect will be part of his spending plan.
• The initiative process requiring voter approval - meaning a process that will come in the middle of the State's 2012-2013 budget year that begins July 1, 2012 and ends June 30, 2013, though the Governor and lawmakers could assume that his initiative proposal will pass and have some impact during the remaining months of that budget year.
• It is not clear if this proposal - and the other proposals that will likely appear on the November 2012 ballot - will or could off-set reductions to other programs including health and human services impacting people with disabilities, mental health needs, seniors, low income families and others.
• The Governor's proposal today does not impact whether or not the State budget "trigger cuts" will be pulled later this month. That determination will be made by December 15th by the Governor's Department of Finance director based on revenues the State will end up reciving by the end of the current 2011-2012 State Budget year, which ends June 30, 2012.  Those "trigger cuts" include automatic new reductions to developmental services and to In-Home Supportive Services (the cut to IHSS has been, at least until a December 15th federal court hearing - temporarily stopped by a temporary restraining order issued last week).

TEXT OF GOVERNOR'S OPEN LETTER ANNOUNCING REVENUE INITIATIVE

SACRAMENTO – Governor Edmund G. Brown Jr. today issued the following open letter to the people of California:

December 5, 2011

When I became Governor again—28 years after my last term ended in 1983—California was facing a $26.6 billion budget deficit. It was the result of years of failing to match spending with tax revenues as budget gimmicks instead of honest budgeting became the norm.

In January, I proposed a budget that combined deep cuts with a temporary extension of some existing taxes. It was a balanced approach that would have finally closed our budget gap.

I asked the legislature to enact this plan and to allow you, the people of California, to vote on it. I believed that you had the right to weigh in on this important choice: should we decently fund our schools or lower our taxes? I don’t know how you would have voted, but we will never know. The Republicans refused to provide the four votes needed to put this measure on the ballot.

Forced to act alone, Democrats went ahead and enacted massive cuts and the first honest, on-time budget in a decade. But without the tax extensions, it was simply not possible to eliminate the state’s structural deficit.

The good news is that our financial condition is much better than a year ago. We cut the ongoing budget deficit by more than half, reduced the state’s workforce by about 5,500 positions and cut unnecessary expenses like cell phones and state cars. We actually cut state expenses by over $10 billion. Spending is now at levels not seen since the seventies. Our state’s credit rating has moved from “negative” to “stable,” laying the foundation for job creation and a stronger economic recovery.

Unfortunately, the deep cuts we made came at a huge cost. Schools have been hurt and state funding for our universities has been reduced by 25%. Support for the elderly and the disabled has fallen to where it was in 1983. Our courts suffered debilitating reductions.

The stark truth is that without new tax revenues, we will have no other choice but to make deeper and more damaging cuts to schools, universities, public safety and our courts.

That is why I am filing today an initiative with the Attorney General’s office that would generate nearly $7 billion in dedicated funding to protect education and public safety. I am going directly to the voters because I don’t want to get bogged down in partisan gridlock as happened this year. The stakes are too high.

My proposal is straightforward and fair. It proposes a temporary tax increase on the wealthy, a modest and temporary increase in the sales tax, and guarantees that the new revenues be spent only on education. Here are the details:

• Millionaires and high-income earners will pay up to 2% higher income taxes for five years. No family making less than $500,000 a year will see their income taxes rise. In fact, fewer than 2% of California taxpayers will be affected by this increase.
• There will be a temporary 1/2 cent increase in the sales tax. Even with this temporary increase, sales taxes will still be lower than what they were less than six months ago.
• This initiative dedicates funding only to education and public safety—not on other programs that we simply cannot afford.

This initiative will not solve all of our fiscal problems. But it will stop further cuts to education and public safety.

I ask you to join with me to get our state back on track.

File Attachments: 

2011-12-05 - Governor Brown's open letter to California seeking 7 billion in temporary taxes.pdf (541.2 KB)