New Taxes, Higher Fees in California Budget

A sales tax on online retailers, less money for higher education, and more than $5 billion of additional revenue from high-income residents are in the budget California’s Democrat lawmakers and governor agreed to June 28.

The agreement came two weeks after Gov. Jerry Brown (D) vetoed a budget with a projected deficit of $9.6 billion.

The new budget also calls for ending and replacing some 400 local economic redevelopment agencies for a savings of $1.7 billion. Defenders of the redevelopment agencies are threatening to file a lawsuit to keep them from being defunded.

Some Taxes Expire
The new budget does not include any changes in public employee pensions, environmental regulations or spending restraints that Republicans had been demanding in exchange for approving a special election on taxes. However, some temporary taxes that lawmakers approved two years earlier were allowed to expire June 30.

Brown said he may try to rake in still more tax revenue with a ballot measure in November 2012.

This new budget calls for $5.2 billion more in projected and actual tax revenues than were estimated in the vetoed budget. Budget officials said this larger tax haul would result largely from unexpected personal income growth for wealthy Californians. If revenues come in below the budget estimates, however, there could be up to $2.6 billion in additional spending cuts.

Assembly Republican Leader Connie Conway of Tulare issued a statement saying the GOP's "steadfast opposition to higher taxes has helped remind Sacramento tax-and-spend liberals of the need to live within our means."

Family Savings Predicted
Conway said the expirations of a retail sales tax increase and a motor vehicle tax will result in the average California family saving nearly $1,000 a year. An increase in the personal income tax is set to expire in 2013.

Shortly before Brown and the Democrat lawmakers announced their budget agreement, several Republican legislators said they could support allowing voters to decide on extending the temporary taxes.

Gov. Brown had proposed eliminating 43 state boards and commissions as well as 5,500 state employee positions if the election were agreed on.

Chriss Street served as Treasurer of Orange County, California from 2007 to 2011 and has been following the California budget situation. He said, "For the first time, the Republicans are not willing to cut a deal where a few term-limited Republicans [in the state legislature] vote for a tax increase, then get paid back with a lucrative appointment to a $100,000 salaried seat on some obscure state agency board. The minority Republican leader has always structured this insider dealing to look like a couple of Republicans 'went rogue'.”

Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association, said no one knows what is going to happen to California's finances.

"If I knew, I would be governor," he said. "What California does next is a mystery to just about everybody."

Thomas Cheplick (thomascheplick@yahoo.com) writes from Cambridge, Massachusetts.