The better tax plan — for another time

Capitol Journal

SACRAMENTO — Most people in Molly Munger’s shoes would be looking for a graceful way out — a way to join Gov. Jerry Brown, since she can’t beat him.

Instead, the wealthy Pasadena civil rights attorney seems to be looking for a fight, a bruiser on behalf of schoolkids.

No public poll — or recent private survey that I’m aware of — shows Munger’s tax initiative with any real chance of passing voters’ muster in November.

A recent USC-Times poll of California voters found only 32% supporting her tax-everybody proposal, with 64% opposed. The rule of thumb is that any measure drawing less than 50% support before the hard campaigning begins is in deep trouble because approval normally declines significantly before election day.

Brown’s “soak-the-rich” idea, by contrast, was supported by 64% in the poll, opposed by 33%.

If Munger’s campaign consultants “are telling her she can win, they’re guilty of political malpractice,” asserts Steve Glazer, Brown’s chief strategist.

Except for the California State PTA, Munger is pretty much all alone in pushing her measure.

Brown’s proposal is endorsed by labor, including the two major teachers’ unions, and most of the Democratic political establishment.

The business lobby is hanging back, waiting to see whether the governor and Democratic-dominated Legislature ever pass public pension, spending and regulatory reforms.

But business grimaced recently when Brown unexpectedly combined parts of his initiative with one that had been pushed by the liberal California Federation of Teachers. Their compromise would take a bigger tax bite out of millionaires than Brown had wanted.

For practical purposes, it’s too late for Brown and Munger to compromise and meet a June 28 legal deadline for qualifying a new initiative for the November ballot.

Brown’s self-imposed deadline is “early May” for collecting enough voter signatures for his new measure. He needs 808,000.

Signature gatherers for both Brown and Munger are on the streets. As with all initiative operations, these are hardly volunteer citizens’ endeavors. The governor is paying professional collectors $3 per signature. Munger is doling out just $1.50 because she got started earlier.

Munger is being heavily pressured to drop her initiative and allow the governor an unrivaled run at the voters.

“I’m not going to do that,” she told me Tuesday. “We’re completely dedicated to moving forward.”

So far Munger — daughter of Berkshire Hathaway Vice Chairman Charles Munger — has spent $3.4 million of her own money on the initiative. A successful campaign — assuming one is even possible — probably would cost at least $30 million.

“My husband and I know” the cost, she says. “Let’s just say we’re bracing. We’re willing to spend what it takes.”

Brown hasn’t been able — or willing — to use the power of the governor’s office to push her aside.

They chatted by phone after Brown cut his deal with the CFT, but neither apparently budged. “I don’t want to complain,” Munger says. “He has a plan of attack and he’s pursuing it. He just doesn’t think he has anything to talk [to me] about.”

Others say Munger became increasingly frustrated with Brown after repeatedly trying to unite with him on a school funding proposal and being rebuffed.

Actually, Munger’s tax measure makes more public policy sense than Brown’s. It just makes less sense politically.

By raising levies on all taxable earnings over $7,316 — more progressively as incomes rise — Munger’s proposal tends to stabilize the tax system by tapping virtually everyone. Brown’s measure makes the currently volatile system even more unstable by raising income taxes only on single filers at $250,000 and joint filers at $500,000.

The top 1% already pay roughly 40% of the state’s income tax revenue. In boom times, the rich prosper and pour money into the state treasury. In bust periods, their capital gains dwindle and so does the state’s tax take.

Brown’s revised measure would hike the sales tax by a quarter-cent, but that would raise only a small portion of the estimated $9 billion generated in the first 18 months. Schools would get $3.8 billion. The remaining $5.2 billion would be used for budget-balancing and to avoid deeper cuts to schools, universities and programs for the poor.

Munger’s measure would raise roughly $11 billion annually. Initially, 70% would go to schools and early childhood education. The other 30% would be used to retire school debt, thus relieving pressure on the deficit-plagued general fund. Ultimately, 85% of all the revenue would be spent on K-12 schools and 15% on early childhood ed.

Ironically, although Brown’s measure purports to force the wealthy to “pay their fair share,” Munger says hers actually would take more money — roughly $1.5 billion more — from couples earning over $250,000.

“Why not just do the bigger, bolder, right thing for our public schools?” Munger asks rhetorically. “Voters should have a chance to say, ‘Don’t just tax the rich people.... I’ll step up and pay out of my pocket to help the kids.’

“They should have a chance to pay a little bit more so California schools are not funded below the level of Alabama and Mississippi.”

But there’s no convincing sign that people would be willing to tax themselves if they could hit up others, especially the rich, instead.

Brown’s strategists fear — and most politicos agree — that Munger’s initiative would confuse many voters and prompt them to also oppose the governor’s.

Munger deserves credit and respect for stepping up and trying to resolve an acute problem: the underfunding of schools.

Now it may be the time to step aside, pull her measure and give the governor a clear shot. If he misses — or hits and makes little impact — she could return to the fight in 2014. You’d think a California governor could cut that deal.