217 -- Unfair, Unwise Tax Hikes

City and county governments across California are seeking desperately to recoup $3.6 billion in property taxes that Sacramento snatched away beginning in 1992, at the depth of the recession. About $1.6 billion was made up through a sales tax hike, approved by the state’s voters in 1993, that generated funds designated for local public safety programs. Now Proposition 217 seeks to restore the rest by selectively raising state income tax rates.

Although there is no question that most counties and municipalities are struggling, in part because of the property tax grab, 217 is not the solution. Gov. Pete Wilson and the Legislature created the problem and they should solve it.

The initiative would retroactively reinstate, to last Jan. 1, tax rates of 10% on taxable income between $115,000 and $230,000 and a 11% rate on taxable income over $230,000. A married couple would pay a 10% rate on taxable income of between $230,000 and $460,000 and 11% on taxable income over $460,000. These higher tax rates were imposed in 1991 and were lifted at the end of last year.

Reinstating the higher rates under Proposition 217 would raise about $700 million a year. By law half would go to schools, the rest to local governments. Proposition 217 also would prohibit the state from shifting additional property tax revenue away from local governments.

Proponents of 217 argue that the measure would affect only the richest 1% of taxpayers, but this group already accounts for about $6.5 billion or 31% of the total personal income taxes collected each year. Is it really fair for voters to hold this small group to higher tax rates when it was Sacramento, not the taxpayers, that was responsible for the costly property tax takeover?

The corrective measure should come from those who created the problem. The Legislature recently passed AB 2797, which would have provided for the return of $100 million of the property tax money to the counties and municipal governments, but Wilson vetoed it. That veto was unwise and no doubt gave impetus to this well-meaning but wrongheaded initiative.

The frustration with Sacramento is understandable. But tax policy by initiative can have dangerous and unforeseen consequences, as Proposition 13 certainly did.

Vote no on 217.