Big state tax decisions lie ahead for California voters
Picking a new president might not be the only crucial issue before California voters at the polls in two years’ time.
They could be faced with as many as four competing initiatives asking them to extend, increase or create taxes that would raise billions of dollars in new state revenues.
Loose coalitions of labor unions and community groups already are researching, polling and building support to extend a temporary boost in top income tax brackets and a sales tax increase passed in 2012. Other groups are working to create grass-roots support for raising commercial property taxes.
Additionally, a team led by Tom Steyer, a billionaire hedge fund manager from San Francisco, probably will qualify a crude-oil-extraction tax initiative for 2016. And health and child-welfare advocates are pondering a possible $2-a-pack increase in cigarette taxes.
“We anticipate there will be a revenue measure,” said Anthony Thigpenn, president of California Calls, a Los Angeles-based coalition of 37 community organizations around the state.
He said that passage of the income tax measure, Proposition 30, two years ago, wasn’t enough to put the state on a stable financial footing.
“Proposition 30 stopped the bleeding but didn’t restore all the cuts made, even given that the economy is better,” Thigpenn said. “It was only the beginning of the discussion.”
The state needs such a conversation about how to keep climbing out of the Great Recession, agreed Laphonza Butler, state council president of the 700,000-member Service Employees International Union.
“We have to make choices about investments, revenues and services,” she said. “How do we stabilize the state for many years to come?”
Influential business lobbies at the Capitol don’t see it that way. Butler’s push for more money to pay for schools, roads and health and other programs, if it happens, would make an already expensive California even more costly and slow job creation, they contend.
The hardest fought battle could be over an attempt to change how the state’s 36-year-old landmark property tax initiative, Proposition 13, treats commercial property, predicted Rex Hime, president of the California Business Properties Assn.
Currently, buildings and land get reassessed by tax appraisers only when there’s a turnover of more than 50% in ownership.
“It will be Armageddon. It will be a huge, huge battle,” Hime said.
The oil industry also is ready for a fight with Steyer, who said the state is missing out on $2 billion in new revenues because it’s the only major oil-producing state that doesn’t collect on every barrel of crude pumped from the ground.
“We haven’t seen any indication he has changed his view and his plan to spend some of his wealth trying to persuade Californians to increase taxes on energy,” said Tupper Hull, a spokesman for the Western States Petroleum Assn.
Tobacco companies — which spent more than $50 million to defeat a 2012 initiative that would have raised taxes by $1 a pack — are honing their message, arguing that new taxes would be costly to retailers and spur cigarette smuggling.
Health groups and other proponents said they need higher levies on each pack — or even e-cigarettes — to recoup more than $1 billion in revenues lost because fewer people smoke.
Liberal Democrats in the Legislature also are considering an extension of the top state income tax brackets. That boost helped erase a $26-billion budget deficit that Gov. Jerry Brown inherited from his predecessor, Republican Arnold Schwarzenegger.
Since then, the state treasury has accumulated a small surplus that the Legislative Analyst forecasts to grow to $4.2 billion by July.
Brown has made numerous public statements emphasizing that Proposition 30 was a temporary fix. Nevertheless, tax-hike proponents suggest that some sort of deal still could be made with the governor and business groups to keep the tax temporary but extend it beyond its current 2018 expiration date.
How all these possible tax increases shake out over the next two years is unclear, said Lenny Goldberg, president of the California Tax Reform Assn. and a longtime advocate of closing what he calls a loophole in Proposition 13’s taxation of commercial property.
“We’re hoping to create a forum where politicians will have a discussion,” he said. “But what will end up on the 2016 ballot is completely unknown and unpredictable at this point.”