Although the state is enjoying multibillion-dollar budget surpluses, thanks largely to a vibrant economy, California voters may face a bewildering array of tax increase proposals next year.
This seemingly contradictory situation is being driven by an assumption — probably accurate — that the November 2020 election will see a massive turnout of voters eager to oppose President Donald Trump’s re-election.
Those anti-Trump voters, it’s also assumed, would likely be willing to impose new taxes on corporations and wealthy individuals. So tax advocates see it as a golden, even unique, opportunity.
One measure, which would remove some of Proposition 13’s property-tax barriers, has already qualified.
However, the union-led backers of that “split roll” measure, which would raise taxes on warehouses, hotels, office buildings and other commercial properties by an estimated $11 billion a year for schools and local governments, set it aside after spending several million dollars to qualify it. They are now proposing a substitute.
Their initiative had drawn sharp criticism from county property-tax assessors about its workability and opposition from small-business owners who said it would raise their rents.
So the backers, the “Schools and Communities First” coalition, made several revisions to quiet the critics before launching a new signature-gathering effort, although it’s uncertain the group will succeed.
Meanwhile, the California School Boards Association wants to place another tax measure on the same ballot. It would raise income taxes on large corporations and the state’s highest-income residents by about $15 billion a year, with proceeds going to schools.
“Since the judiciary and Legislature have declined to provide the resources needed for student success, the next step is an electoral remedy,” Troy Flint, a spokesman for the school boards, told EdSource, an education website.
If the measure succeeds and generates the assumed $15 billion, it would raise per-pupil spending by roughly $2,500 a year. The advocates’ longer-term goal is to match the highest-spending states, which would cost at least $30 billion a year.
Finally, state Sen. Bob Hertzberg, a Van Nuys Democrat, is proposing some kind of sales-tax overhaul, perhaps applying it to services, and hopes the Legislature will place it on the 2020 ballot.
Obviously, those who would be hit with the new taxes, particularly business groups, will resist mightily.
The commercial real estate industry and its allies have pledged to spend $100 million to defeat the split roll measure. The California Taxpayers Association and others have formed “Californians to Stop Higher Property Taxes” to marshal opposition. And the California Chamber of Commerce has created the “California Tax and Budget Project” to block extension of sales taxes to services.
If the proposals make the ballot, the conflict, backed by many millions of campaign dollars on both sides, will be reduced to two arguments:
- Pro-tax groups will contend that schools and local governments are being starved of money for vital public services, with education — very popular among voters — leading the drive.
- Anti-tax forces will argue that new taxes aren’t needed with big state surpluses, that they would be passed on to consumers and undermine the economy and that runaway costs for public-employee pensions are the real driving factor.
There may be an effort next year to draft one big tax overhaul in the Legislature to replace the pending ballot measures.
If that doesn’t happen and several competing measures make the ballot — plus hundreds of local tax increases — they could so confuse voters that all would fail, thus tarnishing the golden moment tax advocates cherish.