Dan Walters

Dan Walters: Perhaps Brown’s tax hike wasn’t needed after all

Dan Walters
Dan Walters

When Gov. Jerry Brown unveiled his proposed 2014-15 budget this month – one based on estimates of sharply increased state revenues – a reporter asked him whether, in retrospect, California needed the tax increase he had persuaded voters to approve in 2012.

Brown’s response, in essence, was that the tax boost’s money is needed to pay off the debts that the state had incurred, not only for past budget deficits, but for long-term future obligations that total about $350 billion.

Certainly paying off accumulated debts is a worthy goal. But the tax increase is temporary and, unless continued by voters or the Legislature, will have very little impact on the long-term debts that Brown lays out in the budget.

The question, really, was whether Proposition 30’s sales and income tax increase was needed in the immediate future, especially in light of the union-backed campaign that told voters it was vital for the schools.

The school pitch was always somewhat bogus, since education was already guaranteed a major chunk of state revenues. Clearly, Brown et al. chose education as the focal point of the campaign simply because it is, by far, the most popular category of state spending.

They would never have told voters to raise taxes to give more money to prisons or welfare.

Proposition 30 is generating about $7 billion a year for the state and is due to expire just about when Brown would be ending his last stint as governor in 2019. But an improving economy is also producing a bumper crop of tax revenues. Had the tax hike not been enacted, the state would still have seen a sharp increase in revenues, roughly $14 billion more than it had during Brown’s 2011-12 budget.

The state’s constitutional obligation to schools was increased by having Proposition 30’s revenue in the calculation, but only about a third of the temporary tax money is actually going to the schools – a sharp contrast with the campaign rhetoric.

The rest is being used for other purposes, including a boost in welfare grants, prisons, state employee pay hikes and other categories that the campaign carefully avoided mentioning.

Therefore, the answer to that reporter’s question is that, in retrospect, because of the ensuing economic rebound, Proposition 30 was not needed to close the budget deficit – although when it was proposed, no one could have said, with certainty, that the sharp recovery would occur.

Moreover, it appears that the state may see several billion dollars above the current revenue estimates, which would further diminish Proposition 30’s relative impact.

The rising revenues, however, also fuel demands from liberal groups and Brown’s fellow Democrats for raising spending even higher, and fending off those pleas looms as a major headache for the remainder of Brown’s governorship.