Jon Coupal

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Another View: AB 1500 could test Brown's tax-vote promise

Published: Sunday, May. 13, 2012 - 12:00 am | Page 2E
Last Modified: Sunday, May. 13, 2012 - 10:05 am

Jon Coupal, president of the Howard Jarvis Taxpayers Association, is responding to Dan Morain's Wednesday column "Profits up, deficit rising – blame tax breaks." In his column, Morain wrote: "Various changes have cut corporate tax collections by $1.2 billion compared to what corporate taxes would have been without these changes, the (legislative) analyst has said."

When one political party controls the legislative and executive branches of government, disputes are usually fought behind closed doors. Battles rarely see the light of day. But that's not happening in Sacramento. Legislative Democrats are on a collision course with Gov. Jerry Brown's promise not to raise taxes without a vote of the people. Those were his exact words, face directly into the camera, in campaign ads that ran throughout California and still ring in the ears of the state's electorate.

Speaker John A. Pérez seems determined to test the governor's promise by promoting a $1 billion tax increase on businesses that hire tens of thousands of workers in California. His Assembly Bill 1500 would change the way companies, particularly those that manufacture middle-class goods – toilet paper, diapers, tissue, toothpaste, etc. – are taxed. The proceeds wouldn't be used to lower the budget deficit or reduce taxes elsewhere, but to subsidize CSU and UC tuition payments.

The speaker claims his tax increase closes a "loophole" on out-of-state corporations, something that is undoubtedly poll tested in the school of class warfare and the Occupy movement. However, the truth is that AB 1500 changes the way businesses have been paying taxes for 40 years.

The complexities of business taxation aside, if it walks like a tax increase and quacks like a tax increase … it's a tax increase. That's why the state's nonpartisan legislative analyst rejected the suggestion that it was a loophole and called it a tax increase.

That's where things get sticky for the governor. If Republicans shoot themselves in the foot and vote for AB 1500 – thankfully, tax hikes still require a two-thirds vote of each house – the bill tests the governor's promise. It will be Jerry Brown's "Read my lips" moment.

This is a defining moment for California. There are already three multibillion-dollar tax initiatives headed for November's ballot. If Brown breaks his promise and raises taxes now, he will lose more credibility with voters than he has already due to his failure to right the ship of California. Moreover, another tax hike on businesses will increase unemployment, decrease opportunity for private sector growth and result in even more deficits and budget cuts far into the future.

So will Jerry break his promise? If AB 1500 never clears the Legislature, he can avoid the test. For him, that might be the best possible outcome.

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