California State Tax Increase Proposition (2011)

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A California State Tax Increase ballot proposition did not appear on the statewide ballot in California in 2011. The measure would have asked voters to re-instate about $12.5 billion in tax increases that were imposed in early 2009 and that were due to expire on July 1, 2011.

California's state budget faced an estimated $28 billion budget deficit heading into the 2011-2012 fiscal year. According to then-newly-elected Gov. Jerry Brown, the "day of reckoning" had arrived, and voters would have to make a choice between imposing higher taxes on themselves, and reducing state spending.[1]

Brown began hinting to the press in early December 2010 that he might ask the California State Legislature to refer a tax hike ballot proposition to a statewide ballot in 2011.[2]

The most likely date for an election on these tax increases was originally thought to be June 7, 2011.[3] However, March 31, the drop-dead deadline for such a referral, came and went without an agreement in the California State Legislature about what to put on the ballot.

Details

If a tax hike measure had gone to the ballot, supporters planned to request a tax hike of $12.5 billion a year. This would have included re-instating $9.2 billion in temporary tax increases imposed in February 2009 for five additional years.[4] A $12.5 billion annual tax increase would have reduced by half the state's projected $25 billion annual budget deficit. The other $12.5 billion needed to reduce the budget deficit to zero would have come from spending cuts.[4]

$9.2 billion in temporary taxes were imposed in February 2009. Those taxes ended on July 1, 2011. A 2011 ballot proposition voted on after the July 1 expiration would have re-instated those taxes for an additional five years. The February 2009 tax package:

  • Imposed a 0.25% surcharge for each income tax rate. This surcharge ended on January 1, 2011.[5]
  • Lowered the dependent exemption credit from $309 to $99. This change ended on January 1, 2011.[5]
  • Increased the California sales tax by 1%. This increase ended on July 1, 2011.[5]
  • Increased the state's motor vehicle license fee from 0.65% to 1.15%. This increase ended on July 1, 2011.[5]

Negotiations and deadline

Bill Emmerson, one of five moderate Republicans negotiating with Jerry Brown

Gov. Jerry Brown set March 10, 2011 as his drop-dead deadline for a vote on the budget, but on March 9, he instead asked the California State Legislature to delay its vote on the proposal that would lead to a June 7 special election.[6]

The logistical and practical considerations involved in organizing an election meant that there was a drop-dead deadline past which it would have been impossible to declare that an election would take place. John Myers, Sacramento Bureau Chief for KQED's The California Report, wrote on February 16: "The bottom line is that lawmakers can rejigger the process in a number of ways. But under any scenario, getting beyond March 11 is risky business."[7]

The extra time was needed to find a few Republicans in each chamber of the state legislature, the California State Senate and the California State Assembly, to go along with Brown's plan to put the proposed tax hike on the June ballot. Democrats were two votes short of a two-thirds majority in the lower house and three votes short in the upper house.

Republicans negotiate

The governor's team negotiated with five moderate Republican state senators, Tom Berryhill, Sam Blakeslee, Anthony Cannella, Bill Emmerson and Tom Harman.[4]

What the Republicans were said to be asking for, in return for their vote to put the tax hike proposal on the June ballot, were:

  • Revisions to the pension system for public employees.[4]
  • A state spending cap.[4]

Non-GOP options

As March 2011 wore on without the votes required to put a proposition on the June 7 ballot, Brown indicated that he was mulling over ways to put a proposition in front of the state's voters that would not require the cooperation of the handful of Republican legislators he'd need to get a measure on the June ballot. Options he was said have considered include:

  • Instead of obtaining the consent of a 2/3rds supermajority vote of both chambers of California State Legislature, collect signatures on petitions. If this route had been chosen, the desired election would not have taken place until, at the earliest, November 2011. The tax increase approved by the California State Legislature in early 2009 expired on July 1, 2011. The perceived disadvantage of waiting until November 2011 to vote on Brown's proposal was that a June proposition, voted on while voters were still paying the higher taxes, could be spoken of as a "tax extension", while if voters did't see the proposition until November, they would be more likely to perceive it as a more politically unpalatable "tax hike".[8]
  • Rely on the advice of some attorneys who said that Brown does not need a 2/3rds supermajority vote in the state legislature and could, instead, refer the desired ballot proposition to the June ballot with a simple legislative majority. These attorneys said that if the prospective June ballot measure was labeled as an amendment to a previous tax measure approved by voters, then it could go on the ballot with a simple majority. This is because by law, amendments to previously-approved measures only require a simple majority to qualify for the ballot. For this strategy to have worked, Brown would have had to identify a specific, pre-existing ballot proposition and couch a June 2011 measure as an amendment to that specific proposition.[8]

Voters and tax increases

Approved increases

In the 30 years from 1980-2010, California voters approved one tax increase (1993's Proposition 172) in a special election.[5]

However, California voters approved tax increases 4 times since 1980, when those tax increases were on a regularly-scheduled primary or general election ballot:

Views on different taxes

The Public Policy Institute of California released a poll in January 2011 pertaining to how California's likely voters felt about different types of possible tax increases.[9]

Type of tax Approve of an increase Disapprove of an increase
Taxes paid by corporations 55% 42%
Personal income tax 27% 70%
Sales tax 34% 64%
Vehicle license fees 36% 62%

Public sentiment on election

The Public Policy Institute of California released a study in January 2011 indicating that 2/3rds of California's voters were in favor of holding a June 2011 special election on budget and tax questions.[10]

Text of measure

In a January 27, 2011 ruling in Howard Jarvis Taxpayers Association v. Bowen, a case about the ballot language for 2008's Proposition 1A, the California Third District Court of Appeal said that the California State Legislature cannot dictate the ballot language for statewide legislative referrals because to do so is a violation of 1974's Proposition 9.[11]

"...to the extent it specified the ballot label, title and summary to be used, the bill negated the Political Reform Act's requirement that the official summary of the bill be prepared by the Attorney General in addition to the ballot label and title that are prepared by the Attorney General. As we will explain, this ad hoc amendment of the Political Reform Act did not further the purposes of the Act and was not approved by the voters. Thus, it was invalid. Simply stated, the Legislature cannot dictate the ballot label, title and official summary for a statewide measure unless the Legislature obtains approval of the electorate to do so prior to placement of the measure on the ballot."[12]

The decision, written by Arthur Scotland, with Harry Hull and George Nicholson concurring, ended a practice that the California State Legislature started as far back as 1990 of dictating the ballot language for its referred statewide propositions, and prohibiting the state's attorney general from taking a role.

Coming as it did in late January 2011, the court decision changed the calculations being made in the state legislature about the odds that a June 2011 tax increase might pass, since the state legislature was then aware that it would not be able to write the ballot language for any such measure.[13]

Supporters

Gov. Jerry Brown was the lead supporter of the potential statewide tax increase ballot proposition. He said, "I think there is a significant number of people who have an open mind. And it'll be up to the Legislature, myself and the business community and citizen groups and parent-teacher associations to make the case. And then whatever the people say, obviously we'll live with that."[5]

Path to the ballot

According to reporter Steve Harmon, "How Brown brings a tax vote to the people is a tangled question filled with unlimited traps and complications, starting with the need to bring Republicans and Democrats together, stave off revolts from his own allies who will feel a lot of pain as his plans emerge, and persuade a skeptical public."[1]

Supermajority requirement

It takes a supermajority vote in California to refer a tax increase to the ballot. As of the state assembly and state senate elections of 2010, the Democratic Party did not enjoy a supermajority in either chamber:

Party As of November 2014
     Democratic Party 55
     Republican Party 24
     Vacancy 1
Total 80
Party As of November 2014
     Democratic Party 27
     Republican Party 12
     Vacancy 1
Total 40

Two Republican votes in both chambers were necessary to reach the 2/3rds supermajority threshold.

Memories of the Sacramento Six

Jerry Brown indicated that he hoped to gain a few Republican votes, both because a few Republican votes were required to reach the needed supermajority level, and because he wanted to be able to say that the vote to put the tax increase on the ballot was bi-partisan.[14]

In 2009, when the Sacramento Six joined with the Democratic majority in the state legislature to put a package of tax increases on the May 19, 2009 ballot, trouble ensued for the Republicans who broke ranks with their party.[15]

Five of the six Republicans in the Sacramento Six went on to either retire, or lose their next electoral contest.[4]

Grover Norquist of Americans for Tax Reform said that his organization would hold Republicans in California who signed the group's "no new taxes" pledge to their word.[4]

Referral with a simple majority

According to Dan Walters, Brown and Darrell Steinberg, his key legislative ally in the tax hike battle, were exploring two methods they could use to refer the tax hike to the June 2011 ballot through a simple majority vote, which the Democratic Party's legislative majority in both chambers could easily deliver.

The two pathways to a simple majority referral were:

  • Assert that the section of the California Constitution that allows the California State Legislature to propose amendments to previously approved initiatives is the rationale for referring a tax hike to the June ballot, on the theory that the additional taxes are an amendment to a previously approved initiative. In this case, a potential June 2011 tax hike initiative could be said to be an amendment to California Proposition 63 (2004). Proposition 63 imposed an income tax surcharge on the rich for mental health programs.[15]
  • Assert that Proposition 25, approved by the voters on November 2, 2010, allows tax hikes to be referred to the voters with a simple majority vote, if the tax hike is defined as a budget implementation measure. (During the campaign over Proposition 25, its supporters vigorously denied that it could ever be used to justify such a move. Proposition 25's opponents went to court to try to get its ballot title changed to reflect the possibility that it could be used to justify a tax increase with a simple majority vote. California's 3rd District Court of Appeals denied the request.[16])

Cost of election

The cost of holding the special election was estimated at $70 million. These costs would have been borne by California's counties. Sam Blakeslee introduced a bill to require the state to reimburse counties when the state mandates special elections.[17]

References

  1. 1.0 1.1 Contra Costa Times, "Path to California taxes is long and circuitous", December 19, 2010
  2. MSNBC, "Report: Brown may put Calif. budget on the ballot", December 9, 2010
  3. Los Angeles Times, "Brown may ask voters to rip off budget 'Band-Aid'", December 8, 2010
  4. 4.0 4.1 4.2 4.3 4.4 4.5 4.6 Wall Street Journal, "Jerry Brown's budget gambit", January 13, 2011
  5. 5.0 5.1 5.2 5.3 5.4 5.5 Press Enterprise, "Brown's tax plan facing long odds", January 17, 2011
  6. San Francisco Chronicle, "Jerry Brown backs off deadline on special election", March 10, 2011
  7. KQED, "Special Election Deadline? Who Knows?", February 16, 2011
  8. 8.0 8.1 Los Angeles Times, "Tax measure: Gov. Jerry Brown looks at ways to put tax measure on ballot without GOP votes", March 23, 2011
  9. Public Policy Institute of California, "Californians & their government", January 2011
  10. Public Policy Institute of California, "Strong Support for Special Election, Shift to Local Governments", January 26, 2011
  11. San Francisco Chronicle, "Court slaps lawmakers for one-sided measure titles", January 28, 2011
  12. Text of Howard Jarvis Taxpayers Association v. Bowen
  13. Daily Breeze, "Ruling targets bias on ballots", February 5, 2011
  14. Fox and Hounds Daily, "Sneaking Tax Measures on a Special Election Ballot?", January 13, 2011
  15. 15.0 15.1 Sacramento Bee, "Vote margin on taxes key factor", January 12, 2011
  16. Capital Notes, "Budget +40: No, No, Oh All Right", August 9, 2010
  17. California Watchdog, "Will State Pay for Special Elections?", January 14, 2011