Tuesday, January 4, 2011

How Jerry Brown can Raise Taxes

It now seems almost certain that Governor Brown in his budget presentation next week will ask legislators to put measures before voters to extend the temporary tax increases passed in February 2009 scheduled to expire June 30. A special election would be held in June. Unfortunately for Brown, recent history isn't too kind to governors in special elections. As Governor Schwarzenegger learned twice, it is much easier said than done.

That said, it is possible that things could be different for Brown. Perhaps with the outlook so bleak, voters will be willing to continue to tax themselves more in order to preserve popular services. But it won't be easy. In order to overcome the odds, he will have to overcome two very high obstacles.

First, he will have to get five Republican votes, two in the assembly and three in the senate, to put the measure on the ballot.  He'll have to do it by March in order to get it on the ballot in June. That won't be easy. It took months for Gov. Schwarzenegger to get six republicans to do that in 2009. None of those six have returned to state office for this new session, four not by choice.  Needless to say, not many GOP members will be eager to cast that "Aye" vote, especially since every single one has signed the sacred "no new taxes" pledge.

In order to win their votes, he will have to provide some major sweeteners in the deal. Perhaps a hard spending cap, welfare reform, pension reform, breaks for business, or some combination thereof.  He also needs to secure the support early on of center right leaning groups such as the California Chamber of Commerce, which has seemed open to the idea if accompanied by real reform. That could give at least a few GOP members some political cover against the most conservative groups that will not support the extension under any circumstances. It also helps that this is a mere extension of tax hikes and not new taxes, meaning members could argue that it is not a violation of their pledge, much in the same way Republicans in congress argued that extending the existing tax cuts was not a new tax cut.  It is also worth noting that unlike the 2009 tax proposal, nothing would go into effect without voter approval. Members could argue that they aren't raising taxes, instead merely giving the voters the power to do so.

That's the easy part. The hard part is then getting the voters to ratify the agreement.  It is hard to understate how difficult this will be. In 2009 Governor Schwarzenegger did all of the above and still got spanked. By thirty points. Needless to say, Brown will have to do something different - a lot of things different.

He would be wise to give former Gov. Pete Wilson, the only person to ever beat him (and his sister) in a California election, a call. If he does, Pete wwill probably tell him that he's a fool for running for governor instead of enjoying retirement. But once they get past that part of the conversation, Gov. Wilson can offer him some pointers from his successful passage of Proposition 172 in a 1993 special election, which did the same thing as Brown seeks to do now, except even more. It made a half cent sales tax passed to patch over a budget deficit permanent (not just extended).

So what did Wilson do that Arnold didn't do? Unlike Arnold's initiatives, it earmarked funds collected from the sales tax hike to a specific, popular purpose - local public safety. It didn't just get pushed into the general fund for lawmakers to spend as the pleased. Of course, it had the same practical effect - any money earmarked for a specific purpose frees up other money that can be used for everything else.  But in the eyes of some voters distrustful of government, it makes all the difference.

Brown seems intent on doing this. Today's Sacramento Bee reports that the governor may link the extended tax revenues to public schools, which the public still consistently says they want protected from spending cuts (as opposed to, say, prisons). If he does this, the next step is to get everyone on board. Sure, the far right and far left will never support a tax extension and spending limit respectively, but the governor's job will be to build a coalition from the center and push to make it as wide as possible. Schwarzenegger built a broad coalition - including unlikely partners such as the Chamber of Commerce and California Teachers Association. However, other well funded groups, especially on the left, were not on board with the spending cap. $2.8 million was raised against Prop 1A from sources such as SEIU and the California Federation of Teachers.  Though Schwarzenegger's allies had much more, that's still too much. As Brown should know very well after this last election, you can have a very low ratio of your money to your opponents money and still win. That's even more true when opposing a ballot measure - if you can confuse the issue or plant any doubt in the voters mind, you can usually defeat just about anything. The governor will have to make his coalition as broad as possible in order to sap possible sources of opposition money dry.

Finally, the governor will have to focus on the ground game. Most proposition campaigns don't do a lot of phone banking, door knocking, and field work. Instead, they do most of their work via the airwaves and mail. This campaign will have to be different. A typical special election electorate is generally more partisan, older, whiter, and wealthier than a general election electorate.  That doesn't work if you're asking for a tax extension.  He will need a massive ground effort to get those voters likely to support his proposal but who only sometimes vote to the polls.  And unfortunately for Brown, Nikki Diaz isn't likely to help this time.

Even if all of these steps are followed success is not guaranteed. As we all know, voters are unpredictable and distrust of government is at record levels.  So while he's pressing for a tax extension, the governor best get to work on a proposal that doesn't raise taxes. More likely than not, he will have to implement it.

(To be clear, this is an analysis of what Brown should do politically, not an endorsement.  I believe that the taxes presently in place are excessive and hurting our job growth but I also believe that cuts will be painful.  I'll decide when I see the specifics of the proposal)

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