A group of some of California's most powerful billionaires say they plan on putting a $10-billion tax increase on the November 2012 ballot. Calling itself the Think Long Committee, the group says California, with its projected $13 billion budget shortfall and $2 billion automatic trigger cuts to education, needs a major tax overhaul.
As the Sacramento Bee reports, this group isn't the first to propose a change to California's tax system. The difference this time is that its very wealthy members, including Los Angeles philanthropist Eli Broad, Google Chairman Eric Schmidt, former Secretary of State Condoleezza Rice and former governors Gray Davis and Arnold Schwarzenegger, are on the committee and each plan to help fund the expensive process of getting the proposal on the ballot. The committee founder, Nicolas Berggruen, says he will put $20 million of his personal wealth into the effort.
The philosophy behind the "Think Long" committee's 23-page "Blueprint to Renew California," released Monday, is that California needs a long-term financial plan. Thus, the plan includes the creation of an independent 13-member Citizens Council for Government Accountability that would oversee the state's long-term planning.
Central to the committee's entire tax overhaul is its belief that California relies too heavily on personal income tax and thus makes itself vulnerable to downturns in the economy. Therefore, Think Long proposes lowering income tax so that couples making under $45,000 pay nothing, between $45,000 and $95,000 pay 2 percent and greater than $95,000 pay 7.5 percent. To make up the lost income-tax revenue, the plan suggests a new 5 percent service tax. Despite lowered income tax, this service tax would result in Californians of all incomes paying more in taxes.
As the Sacramento Bee reports, the committee could face strong opposition from the state's powerful education lobby because the Think Long plan eliminates a requirement that says the state must repay schools when imposing certain cuts. The Think Long committee, in defense, emphasizes that it plans to allocate at least $5 billion in tax revenue to education.
The proposal also faces competition with labor unions' own tax reform ballot measure, which would raise income tax on high earners and increase sales tax, the Los Angeles Times reports.
Looking at the plan as a whole, Think Long advisor Nathan Gardels told the San Francisco Chronicle that the plan is an "ideological hybrid," including ideas from both the left and the right. In light of Occupy Wall Street demonstrations, he went on to point out that, under the proposed plan, the top 5 percent of earners would pay 62 percent of all income tax.
Still, with tax increases in the measure, it may take all the money these billionaires have to get it passed.
Here's further breakdown of Think Long's proposed tax changes:
Tax increases:
1. Phase in a new 5 percent service tax that would require Californians to pay sales tax on all services, such as legal work or accounting and excluding health care and education.
2. Eliminate personal income tax credits and deductions, except mortgage interest, property taxes, charitable donations and research and development.Tax decreases:
1. Simplify income tax: No income tax for couples making under $45,000; 2 percent income tax for couples making between $45,000 and $95,000; and 7.5 percent for those earning above $95,000.
2. Reduce California's corporate tax, which is one of the highest in the nation, from 8.84 percent to 7 percent, to attract business.
3. Reduce sales tax on goods by half a percentage point.