California Voters Send Taxes Soaring

California Voters Send Taxes Soaring
November 7, 2012

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

California voters have approved measures to raise taxes by billions of dollars and rejected a measure to stop labor unions from forcing members to pay dues for union-backed political activities.

Proposition 30, successfully championed by Gov. Jerry Brown (D), will raise California’s sales tax a quarter-cent on the dollar for four years and the income tax on annual earnings over $250,000 for seven years. The top tax rate on those earning more than $1 million a year will rise to 13.3 percent, up from 10.3 percent.

The measure is estimated to cost taxpayers another $6 billion a year.

“Last night, Californians made the courageous decision to protect our schools and colleges and strengthen the California dream,” said Brown in a statement. “We joined together as Californians first in a resounding victory for education and fiscal integrity. The people of California have put their trust in a bold path forward, and I intend to do everything in my power to honor that trust.”

Budget Balancing, School Funding

Brown said the additional billions of dollars are needed to bring the state’s budget into balance while continuing to fund schools and public safety.

Voters also approved Proposition 39, estimated to take another $1 billion a year from multistate businesses with locations in California. It requires those businesses to apportion their income to California based solely on sales. Currently, businesses may apportion based either on sales or a formula that includes sales, property, and payroll.

Half the money is to be used for schools, and the other half for energy projects.

The November 6 election results were “a total disaster” for California, said John Seiler, managing editor of CalWatchdog.com, a news website devoted to covering California governmental issues.

“Government unions are dominating everything here,” he said. “It’s a disaster for California because we will have more initiatives like these, more ways for government to grab our money. And the Legislature will be two-thirds Democrat, which means they’ll be able to do whatever they want to do. They need a two-thirds majority to pass tax increases, and now they’ll have it.”

Hedge Funds Benefiting

He added Proposition 39 was designed to steer money to hedge funds with energy investments.

“If you read it, you can see it’s to help hedge funds with alternative energy investments. Thomas Steyer will benefit,” he said.

Steyer is a billionaire hedge fund manager and environmentalist who poured $30 million of his own money into the Prop 39 campaign.

If there is any consolation for California taxpayer advocates, it’s that Proposition 38 was defeated. This measure was a rival to Proposition 30 that had the strong backing of Molly Munger, daughter of multi-billionaire Charlie Munger, vice chairman of Berkshire Hathaway Corporation, the multinational holding company run by fellow multi-billionaire Warren Buffett. Proposition 38 would have raised taxes $10 billion a year.

“We have the highest-paid public employees in the United States, according to the Census Bureau. Their ability to use paychecks for political activity makes them by far the most powerful political force in California. When they feel threatened, the amount of money they’re willing to spend to mislead voters is almost unlimited,” said Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association.

‘Rogue Corporate Interests’

Like Seiler, Vosburgh also slammed corporate cronyism in California politics.

“We have rogue corporate interests, too, like PG&E [Pacific Gas and Electric Company],” which provides natural gas and electricity to approximately two-thirds of California, he said. PG&E and other major corporations, including Kaiser Permanente, AT&T and Bank of America, supported one or both of the tax increase measures.

“It’s hard to imagine with all the money in these elections, and companies like PG&E giving it out, it doesn’t have a powerful influence,” Vosburgh said.

Even the California Chamber of Commerce, which has many small businesses as members, took a neutral position. Vosburgh said many owners of small businesses will be hit with higher taxes.

“Jerry Brown tried to portray it as a millionaires’ tax even though it hits at $250,000, which hits a lot of small business owners,” he said. “These taxes are going to be another weight on our collective economist chest. It’s not a good thing.”

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)