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Mar 14 2012

Jerry Brown and Teacher’s Union Reach Compromise Tax Increase Initiative Deal

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California Governor Jerry Brown speaks in front of a Boeing 787 Dreamliner plane in Long Beach, California March 14, 2012

Two tax increase mesures for this November’s ballot have been merged with one, Molly Munger’s continuing to be circulated.

After weeks of battling in public and negotiating behind the scenes, Gov. Jerry Brown and the California Federation of Teachers have reached a compromise on a November tax initiative.

The deal would result in a smaller sales tax hike and larger tax increase on the wealthy than the Democratic governor wanted. CFT had been circulating an initiative with no sales tax hike and a two-step increase on earners starting at $1 million.

“This united effort makes victory more likely and will go a long way toward balancing our budget and protecting our schools, universities and public safety,” Brown said in a prepared statement Wednesday afternoon.

The new deal would raise the statewide sales tax by a quarter-cent rather than half-cent per every dollar of purchase. It would retain the governor’s three higher tax brackets starting at $250,000 for single filers. But the last marginal tax hike – at $500,000 for singles and $1 million for couples – would increase by 3 percentage points rather than Brown’s original 2 percentage points.

The income tax hike on the rich would also last longer than Brown’s proposal, going for seven years instead of five. The sales tax hike would still expire at the end of 2016.

As I have said before, I do not think California voters are in any mood to raise taxes with the state of the economy as it is. But, the teacher’s will spin this as a small temporary sales tax and a tax the rich scheme too.

However, if Molly Munger’s initiative qualifies for the ballot, voters may still be confused and likely defeat both.

Also, good luck for the compromise initiative to pass through the Attorney General, Secretary of State and gather the necessary signatures in time to be placed on the November ballot. Governor Brown’s original tax increase initiative will continue to gather signatures as a back-up plan.

Gee, that is not confusing enough, is it?

Stay tuned….

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  • http://twitter.com/SoquelCreek Soquel by the Creek

    Nothing like raising on taxes on those who already pay California’s highest tax rates and a lion’s share of total taxes.  If I understand the article correctly, the rates would increase from their current 10.3% for those making $1 million or more to 13.3%, a 29% increase.

    Just as a point of reference, California ALREADY has the nation’s 2nd highest top marginal tax rate behind Hawaii.  Even our next highest rate, which starts at $48,000, is 4th highest in the nation!

    CHART: 
    http://www.twitpic.com/8vguui/full Never mind that the 2/3rds majority of taxpayers required to pass such an increase pay an average effective tax rate of less than 2%.  But that’s fair, right?Why did California’s tax revenues fall so much?  It’s because incomes for those at the top cratered by 50.5% between 2007 and 2009.  They still paid an effective tax rate of 9.62%, but because their income shrank 50.5%, so did their tax liability.  The result?  California came up over $10 BILLION short.What’s the Governor’s and CFT’s solution?  Make California even MORE dependent on this group.CHART: http://www.twitpic.com/8pvtzj/full

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