Governor Jerry Brown has dealt away some potential problems on the left to strengthen his chances of passing a revenue initiative in November.
Brown dealt with California's chronic state budget crisis by making big cuts in 2011. But he couldn't get Republicans to go along even with a public vote on extending 2009's temporary tax hikes, and so has had to go to the ballot this year. After Brown and his allies succeeded in convincing a group of billionaires and former officeholders (the Think Long Committee) to back away from their own tax initiative plans, which would have lowered tax rates on the rich and corporations, likely muddying the electoral waters with a big money campaign even though they had little chance of success, he then had two other initiatives to deal with.
This week he dealt with the most problematic for him. I wrote early in the week on New West Notes that "Brown's problem with the two other tax initiatives may be smaller than it appears. I'll have more on that." Here's the "more on that" part.
The "Millionaires Tax" initiative was the most troublesome of the two. Unlike a plan by heiress Molly Munger, which would raise income taxes on most everyone to fund schools, the Millionaires Tax polled very well.
But on Wednesday, the Millionaires Tax crew -- a coalition of the California Federation of Teachers and a variety of left-liberal organizations -- finally acceded to reality. They couldn't raise the money for a full-tilt campaign, but they could qualify their initiative. (Despite a lot of hype, the $2 million raised by the campaign was almost entirely from the California Federation of Teachers, the state's smaller of two teachers unions, with the other in Brown's camp along with almost all the rest of labor.) And then hope that the message was strong enough to stand the storm.
Which, as I discussed on New West Notes last week after their press conference/media conference call insisting on just that, was rather wishful thinking. They tried to talk themselves into the notion that their initiative could not be be beaten. But this view, as I pointed out, required magical thinking.
For his part, Brown acceded to the reality that the initiative and its backers weren't going away. And that, at least starting out, their approach of taxing the rich more heavily was more popular than his more moderate tack.
So the two camps reached a meeting of the minds on some fairly logical deal points.
The compromise measure would raise taxes on the rich more than in Brown's original version and less than in the Millionaire Tax initiative version. And it would be a temporary tax increase rather than a permanent increase as in the left-wing coalition version.
Time is very tight on qualifying the compromise measure, so Brown's original initiative will continue moving forward just in case. The Millionaire Tax initiative will not. Which means that if the new measure can't meet the deadline to qualify, Brown's original initiative will.
This leaves Munger's initiative hanging out there as the outlier. She keeps putting money into the campaign, but it is unlikely to be much of a problem in the long run.
Here's a rundown of the new revenue initiative, which also lowers the sales tax hike from a half-cent to a quarter-cent while providing more revenue and fully addresses the structural deficit in the general fund.
Brown hailed the deal, saying it "makes victory more likely," which is probably true. Unless the increased tax hike on the rich spurs opposition from big business groups, which opposed the Millionaires Tax and the Munger measure but were neutral on the governor's.
Of course, what those folks need to ask themselves, to borrow a line from Brown friend Clint Eastwood's Dirty Harry, is this: Do they feel lucky?
The Occupy movement isn't much, but the core concept is strong. And if business and the rich get blamed for more draconian cuts at a time when their coffers are brimming, the next initiative could be far worse.
Joshua Pechthalt, president of the California Federation of Teachers and a co-chair of the Millionaire Tax Campaign, also hailed the deal with Brown and Democratic legislative leaders:
Our coalition welcomes the opportunity to join Governor Brown, Senate pro Tem Steinberg, Speaker Pérez and their allies in crafting this win-win measure. Our values and principles are clearly reflected in this new initiative that now includes a 50% decrease in the sales tax rate, reduces the burden on working families and ensures a greater contribution from the 1%. These changes will generate an additional $2 billion in vital funding for the next fiscal year, and we are determined to ensure those funds benefit the communities that have been hit hardest by budget cuts and our cash-strapped higher education institutions.
The political bottom line?
Good for Jerry Brown, and quite possibly for California.
Brown has eliminated a second competing initiative, this one, unlike the Think Long plan, with real popularity going for it. By incorporating some of its provisions, he limits some of his measure's popular downside (the sales tax) and heightens the revenue.
And if there isn't time to qualify it, he has his original initiative.
The only downside is if the increased progressivity of the package moves business lobbies off the fence on his initiative and into opposition.
And the answer to that question may well turn on just how lucky those folks feel. After all, there is a very good chance they would lose anyway. And if they happened to succeed, and more draconian cuts take place, the blame is squarely theirs, with a likely whirlwind in store for the future.
You can check things during the day on my site, New West Notes ... www.newwestnotes.com.
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