It would be irresponsible to approve millions of dollars in new tax breaks while the state’s budget “remains precariously balanced,” Gov. Jerry Brown said this week while vetoing seven measures.
“Each of these bills creates a new tax break or expands an existing tax break,” Brown said. “In total, these bills would reduce revenues by about $300 million through 2017-18. As I said last year, tax breaks are the same as new spending – they both cost the general fund money.”
Among the measures Brown rejected were those exempting diapers and women’s menstrual products from sales taxes and giving homeowners with lender write-downs on their underwater mortgages an income tax break on their paper incomes.
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The bills’ legislative sponsors were angered by Brown’s rejection.
“Today Governor Brown sent a clear message to all women in California,” said Assemblywoman Cristina Garcia, who carried Assembly Bill 1561. “He told us periods are a luxury for women. Let me be clear; biologically periods are not luxuries and they are definitely not something women should be ashamed of. We have a long way to go in our journey for equity in California.”
The specifics of these bills aside, Brown’s position on punching holes in the state’s tax system is not quite as high-minded as he makes it sound.
For one thing, he’s shied away from anything approaching comprehensive tax reform during his second governorship, even though the need for a major overhaul is evident to anyone.
The state budget is dangerously dependent on taxes from a relative handful of high-income Californians. Brown’s 2012 temporary tax hike increased that dependence. A November ballot measure, Proposition 55, would extend it.
Brown has acknowledged the “volatility” that the dependence fosters, because incomes of the wealthy are tied to the stock market and other investments. But he’s declined to spend political capital on making the tax system more stable.
Furthermore, there are already tens of billions of dollars in tax exemptions on the books that warrant reconsideration and, in some cases, elimination.
While Brown rejects relatively minor sales tax breaks for diapers and tampons, for instance, he’s not touched a special sales tax break for custom computer software that benefits corporate purchasers but doesn’t apply to the off-the-shelf software that ordinary consumers buy.
While he wants beleaguered homeowners who get mortgage breaks to pay income taxes on phantom income, he eagerly signed legislation a couple of years ago to expand corporate income tax credits for wealthy movie and TV producers, including the Disney conglomerate, that do their shoots in California. His administration even maintains a website that invites producers to apply for the tax credits.
The cost, in terms of lost income, for the movie tax break alone, is about $300 million a year – or just about Brown’s estimated cost (over two years) of the seven proposed tax breaks he says would be damaging to the state budget.
As with many other issues, Brown’s only consistency is his inconsistency.