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California’s 2016 ballot could be a tax blitzkrieg

Joel Fox
Joel Fox

If voters were a bit underwhelmed by the measures on the California ballot last week, just wait for the 2016 election.

Already there is talk of potential initiatives on legalizing recreational marijuana, public pension reform, minimum wage increases and a basket full of tax hikes. The machinations around the tax issues could be most compelling just because so many are being considered.

The initial focus is on the Proposition 30 taxes that are expiring soon. A number of state officials, including newly re-elected Superintendent of Public Instruction Tom Torlakson, have argued that the Proposition 30 taxes – a quarter-cent sales tax and a personal income tax increase on the wealthy – be extended or made permanent. In addition, a coalition of public employee unions and groups that want to see more state spending are trying to figure out how to persuade voters to support a property tax increase on commercial property, a tax on oil extracted from the ground and a cigarette tax increase.

Naturally, the first reaction is: How in the world do advocates expect voters to welcome all those taxes with open arms? Two reasons.

One, the advocates will argue the tax increases are not on voters, but on someone else, especially if the sales tax piece of Proposition 30 is dropped. They will tell us the taxes are on the rich, corporations, Big Oil and smokers. Of course, small businesses, including independent oil drillers, will be affected, but don’t expect to hear that raised.

The second reason is that advocates want to get on the 2016 ballot to take advantage of voter turnout in presidential elections. Unlike last week’s midterm election, which led to some Republican gains even in deep blue California, more Democratic-friendly groups are expected to vote in 2016.

Results of last week’s election also point to a push for tax increases by initiative. Because Democrats lost the two-thirds majority in the Legislature necessary to put taxes on the ballot without Republican votes, interest groups supporting taxes understand they probably have to go the initiative route. That means they will have to determine what strategy might work given all the tax proposals on the table and write their measure no later than a year from now so they can begin the initiative qualifying process.

One potential roadblock to this full-on tax blitzkrieg is Gov. Jerry Brown. During the campaign, Brown said he had no intention of supporting an extension of Proposition 30, reminding all who would listen that the taxes were temporary. He also said hands off Proposition 13, the iconic property tax law that controls both residential and business property taxes. However, in 2016 Brown will have just two more years in office, and those who want tax increases do not want to wait for 2018, when Proposition 30 is pretty much done and there is no presidential election to draw voters.

There are many possible storylines as the tax advocates move forward. Attempts will be made to persuade the governor to ensure fiscal stability by continuing the income tax increase. A deal might be offered to the business community: Don’t oppose the Proposition 30 taxes and no commercial property tax initiative will be filed. Business will have to be cautious of such proposals. Once the tax extension is in place, another tax could be proposed in future elections.

As always, voters will have the final say. Perhaps the measures on the 2016 ballot will be enough to get them to vote.

Joel Fox is president of the Small Business Action Committee and co-publisher and editor of FoxandHoundsDaily.com, which carries commentaries on California business and politics.

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