Because Governor Schwarzenegger is impotent at brokering a budget, the state will be out of money on February 1st - and will start issuing I.O.U.'s. That means no tax rebates, no financial aid and no other means of assistance. Now we are looking at a statewide special election to get out of this mess. If all we get is more Arnold gimmicks to delay the problem another year, it will be a tragically wasted opportunity. Because now, more than ever, the public is willing to consider tax reform to get us out of the right wing
Scrapping the Two-Thirds Budget Rule
Specifically, the poll in question showed that a 53-41 majority of likely voters would support lowering the budget vote requirement down to 55%. The Public Policy Institute of California (PPIC) has been asking this question every year since 2005, and it's the first time that a majority of voters approved this idea. As recently as May 2008, the question failed 39-53, with similar poll results in earlier years. Clearly, a seismic shift in public opinion has occurred.
But it would be a lost opportunity to stop there ...
Local Revenue Raising Reform:
How in the world would Californians give up their power to raise taxes at the local level? The same PPIC poll asked about lowering the requirement to raise special taxes at the local level from two-thirds to 55% (i.e., amend Prop 218 to make it less draconian.) A majority (50-44) said it was a "good idea," but the margin was closer among "likely voters." Prop 218 passed thirteen years ago with little fanfare - because progressives were too distracted by trying to save affirmative action (No on 209), raising the minimum wage (Yes on 210) and supporting medical marijuana (Yes on 215.) Its damage has been catastrophic, but now we have a chance - possibly the only chance ever - to undo it.
Reforming Property Tax Revenue
Would voters also repeal Prop 13? Don't be silly. The 1978 tax measure that castrated property tax revenue - and spawned the Reagan Revolution across the country - is still popular with Californians, especially long-term homeowners who enjoy the stability of capped increases. But a Field Poll from June 2008 showed they're open to amending it, and I couldn't imagine a better time - when public opinion is willing to entertain such measures - to put it on the ballot in the name of rescuing the state.
Prop 13 was billed as saving residential homeowners, but by far its biggest beneficiaries have been corporations who own commercial property. Because commercial property has much lower turnover, they pay much lower property taxes. Imagine, for example, how much more revenue the San Francisco public schools would get if just one building - the Transamerica Pyramid - were exempt from Prop 13. In the same June 2008 poll that showed voters strongly support Prop 13, the idea of "split roll" taxation either got 46-43 support or a whopping 61-27 approval (depending on how the question was asked.)
Progressives like Rob Reiner have been talking about a "split roll" amendment to Prop 13 for years. Now is the moment to finally pass what folks have been saying for years.
For the June special election, San Francisco may put another parcel tax on the ballot - like they did in June 2008 to raise public school teachers' salaries. I voted for Prop A, but was not thrilled that every homeowner got levied $198-per-year, regardless of the size or value of their property. Which means I will now pay the same amount for my 400 square-foot Tenderloin studio that Dede Wilsey pays for her mansion in Pacific Heights - which is unfair. I'm not against taxing property owners, but let's have some equity here.
Guess what? San Francisco isn't allowed to pass a "progressive" parcel tax, because Prop 13 requires them to be "flat." Rather than repeal Prop 13 entirely, allowing cities to pass parcel taxes that are not regressive sounds like a politically possible solution.
Other Budget Solutions for the Special Election
While structural solutions must be the priority, expect the statewide special election to have a lot of specific revenue measures on the ballot. Schwarzenegger's fiscally reckless idea to borrow against future lottery revenues is not popular and would fail, but the PPIC poll showed that his alcohol tax proposal would easily pass - and his regressive temporary sales tax is mildly popular. What's most interesting, however, is that raising the vehicle license fee by $12 would pass 61-37 - and even Republican voters support it by a 7-point margin.
If the Governor wants the special election to be about tax measures (most of which are just quick fixes), Democrats must demand a Proposition to raise income taxes for the wealthy. The PPIC poll showed that idea passing by a 40-point landslide, one of the most popular revenue proposals. Democrats in the legislature tried restoring the upper-income tax bracket to Reagan-Wilson levels last summer, but with the "two-thirds rule" could not muster its passage. And the Governor never supported it - although he
If we're going to raise taxes, let's do it right. Put a tax measure on the special election ballot to restore the upper-income tax bracket, and see if the voters like that better than Schwarzenegger's ideas. With the fiscal crisis devastating our state coffers, it's time for everyone to sacrifice - but let's demand that those who can afford to pay give their share.
More:California California Budget Stalemate California Budget Crisis Arnold Schwarzenegger Prop 218
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