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Posts Tagged ‘tax increases’



Looming Battle: ‘Extending’ vs. ‘Increasing’ Taxes

Monday, January 17th, 2011

As we suggested Friday, one of the reasons the Howard Jarvis fetishists, union bashers and gold standard crackpots are threatening to strangle any Republican legislator who helps Gov. Jerry Brown get an extension of income, sales and vehicle taxes onto the June ballot is likely their fear that California voters just might agree to extend those taxes rather than cut further into schools, parks, prisons, public safety and health care.

And it turns out they have good reason to be afraid: a survey done by pollster Jim Moore for the California Issues Forum has found that “to avoid 20-25% deeper state budget cuts” 58% of California voters – including nearly four in 10 Republicans – would indeed support extending those taxes. And that’s after they’re spelled out as a 1-cent increase in the state sales tax, a 1% increase in state income taxes, a 1% increase in the vehicle license fee.

According to Moore’s survey of 1,000 likely voters, 74% of Democrats, 57% of independents and 37% of Republicans would support the tax extensions. (The survey asked about a four-year extension, but it’s likely that asking about a five-year extension as Brown is seeking would have made little difference.)

Interestingly, only 36% of voters – 30% of Democrats, 47% of Republicans and 21% of independents – were even aware that $8 billion in temporary tax increases were enacted in 2009. Nearly two thirds of the voters – 64% — did not know that taxes had been raised.

Even after they were told about those increases, only 14% of voters said they’d been hurt by them a great deal, while 29% said they were hurt somewhat and 44% said they were hurt very little. Another 13% had no opinion.

The underlying problem for Brown, the Democrats and others who want to solve the state’s $28 billion budget deficit with a mix of taxes and cuts, however, is this: 65% of California voters do not trust state government to spend tax money wisely. That includes 82% of Republicans, 74% of independents and even 49% of the Democrats.

On average, voters think about half the money spent by state government – 48% — is wasted. And six in 10 voters – 72% of Republicans, 65% if independents and 51% of Democrats – think the state’s budget problems result from poor planning, while only 16% blame the national economic recession.

Unless voters are convinced that Sacramento has a plan to spend money more wisely, this fundamental concern is likely to kill any chance of extending those tax increases. Brown’s straight-forward, no-bullshit, tough-love talk about the budget — particularly his proposal to shift billions in tax money and programs from the state to local government — is exactly what voters need to hear if there’s any hope of getting them to go along with extending the 2009 tax increases.

Voters – despite what some liberal pie-in-the-sky dreamers imagine – oppose “increasing taxes to help balance the state budget” 59-37%. But they support “temporarily increasing taxes to help balance the budget” by 53-44%.  Which is why the battle over maintaining  the 2009 tax increases will be a fight about how the issue is framed: as a tax increase (as the Jarvis hardliners will argue) and as a temporary extension (as the Silver Fox et. al. will contend).

Mostly, this will be a battle for the center of the political spectrum – the Democratic and Republican swing voters and the independents – who do not always support the Democratic or Republican candidate or argument.

Moore, the only pollster we know who creates a demographic of swing voters, has found that the Democratic base comprises 38% of the voters while the Republican base accounts for 28%. That leaves 19% as Democratic swing voters and 15% as Republican swing voters.

How does this affect political messaging and outcomes? Consider this question Moore asked: “Republicans often criticize Democrats for being too willing to raise taxes and unwilling to cut spending for ineffective government programs. In your opinion, is this a valid criticism of Democrats?

Overall, 58% of likely votes said it’s a valid criticism and 37% said it was not. But how does that break down? Among Democratic base voters 62% said it is not a valid criticism versus 33% who agreed it is. But 54% of Democratic swing voters, 74% of Republican swing voters and 90% of the Republican base accepted that criticism of Democrats.

By the same token, Moore also asked: “Democrats often criticize Republicans for giving tax breaks to big business and being intolerant of others’ political views. In your opinion, is this a valid criticism of Republicans?”

By 64-33% voters agree with that critique, including 83% of the Democratic base, 83% of the Democratic swing voters, 50% of the Republican swing voters but just 29% of the Republican base voters.

Or consider that by 57-43%, voters say they’d prefer “less government and lower taxes” over “slightly higher taxes for better government services.”  That formula is a winner among 87% of the Republican base voters, 77% of the Republican swing voters and 51% of the Democratic swing voters. Only Democratic base voters would prefer higher taxes and better government services by 70-30%

But when the issue is framed as “less government and lower taxes” versus “better value for the taxes you currently pay,” voters prefer better value by 72-18% That includes 91% of the Democratic base, 78% of the Democratic swing voters and 52% of the Republican swing voters. Only Republican base voters prefer lower taxes and less government and only by 53-47%.

So there you have the battle lines: One side will argue that Brown’s plan isn’t a plan at all and that it will raise taxes to keep bloated government in Sacramento. The other side will argue that Brown and the Legislature have a plan and that they’re seeking a temporary extension of current taxes in order to streamline government in Sacramento.

It’s all about whose message is more compelling and believable, whose is better framed and delivered. But first, Brown and the Legislature must come to terms on budget cuts and a plan to extricate California from the mess left behind by former Govs. Gray Davis and Arnold Schwarzenegger. Unless they can do that, the only choice will be further budget cuts.

JMM Research surveyed 1,000 likely California voters by land line and cell phone Nov. 17-Dec. 4. The expected margin of error for the survey is +/- 2.9% at the 95% confidence level.

5 Questions: What Budget Mess Means for California’s Private Sector

Saturday, March 28th, 2009

Bill Watkins, PhD, is an economist who served at the Board of Governors of the Federal Reserve System before becoming executive director of the Economic Forecast Project at the University of California Santa Barbara in 2000. He and his team recently accepted an offer from California Lutheran University in Thousand Oaks to expand CLU’s economic forecast program and launch a graduate program in economic analysis and forecasting. We caught up with him during his transition to ask him about the real-world impacts of the state’s budget meltdown.

Calbuzz: As a practical matter, what difference does the budget mess in Sacramento make to private sector businesses in California?

Bill Watkins: Unfortunately, the budget is pro-cyclical and reinforces the economic decline. That is, as the economy declines, government spending is declining and taxes are increasing. This is the exact opposite of an economic development program. The other issue is that until there is a permanent solution to the budget, businesses’ future tax environment is uncertain. Since businesses avoid uncertainty that is just another reason businesses may not invest in California.

CB: What is the fallout from cuts in education on the private sector?

BW: California’s schools, including higher education institutions, will shrink, decline in quality, or do both. The decline in education will negatively feedback to economic activity.

CB: What about the tax increases in the budget deal?

BW: Tax increases always increase cost and decrease the volume. The retail tax is particularly questionable given the multi-year decline in retail sales, the ease of purchasing out of state, and the ascendancy of the internet.

CB: The governor and legislative leaders cast the February budget agreement as a momentous step in turning around state government’s long-running financial woes. What’s your view?

BW: After years of financial mismanagement, California’s government is finally being forced to confront its structural deficit. The plan completed in February was inadequate. While some hard decisions were made, the Governor and Legislature still resorted to bailout funds, borrowing and rosy projections. It was recently announced that we have another $8 billion problem, and the ink hadn’t dried on the most recent budget.

CB: Bottom line?

BW: Most economists would agree that cutting state spending and increasing taxes in a deep recession is not a prescription for stimulating economic growth. Quite the contrary, it is a prescription to slow growth. California is compounding the problem. Tax increases and spending cuts were unavoidable after years of profligate fiscal policy. Imposing new regulations that make California increasingly uncompetitive with other states is not necessary. However, California is proceeding to implement increasingly onerous regulations on business. The result will be a very weak economy for years, perhaps decades.

Seven Key Questions the Candidates for Governor Should Answer

Monday, March 23rd, 2009

It’s way early in spring training season in the California governor’s campaign: 442 days until next year’s June 8 primaries, to be exact. But it’s never too soon to start assessing the political talent that’s on the field.

With California facing 10.5 percent unemployment, a growing mountain of debt amid a global credit crunch and a political system in Sacramento that is way beyond dysfunctional, the people of the state simply cannot stand for candidates who try to con them with phony umbrage, personal attacks, focus-tested, superficial stances and trumped-up polarizing issues.

A couple of things we know from our own experience: A moderate –- which you have to be to win statewide –- will be bedeviled by the left-wing (for a Democrat) or the right-wing (for a Republican) of his or her party. And California can’t afford another politician who just wants to BE governor; it needs someone who wants to actually govern.

But the powers of California’s chief executive have been dramatically curtailed and constricted over the past four decades, to wit:
— A series of sweeping and often contradictory ballot measures have stunted and distorted the governor’s fiscal policy-making authority.
— The seas of red ink and billions in annual interest payments in which state government is drowning have sapped the governor’s strength in launching or sustaining new initiatives.
— Term limits have created a constant game of political musical chairs that puts top priority on partisan positioning in the Capitol. Assembly speakers are a dime a dozen and legislators have little reason to fear the governor, regardless of who he or she may be.

Given these limits as table stakes, any candidate who promises and presumes to be effective in the job not only needs the economic smarts to understand California’s financial morass, but also should possess a sure and subtle political talent for managing the wackiness and whims of 120 legislators — not to mention the stones to confront and face down entrenched unions and other special interests long used to getting their own way.

It’s a tall order for any politician, and Arnold Schwarzenegger, who came to Sacramento equipped with little more than easy bromides and breezy pronouncements, has learned the hard way that the day-to-day practice of politics is more art than science, and not as simple as it looks.

Whether or not anyone in the 2010 field can actually govern California in an effective and serious way, is of course, an unknown. What is known is that with the state clearly in decline at a time when the world economy is in turmoil, the stakes are as high as they’ve ever been. Between now and November 2010, calbuzz will focus closely on the gubernatorial campaign and its candidates.

Today, however, we start with a set of meta political and policy questions, and some follow-ups, that we think are important.

1. Do you have a serious plan to address the structural deficit in California’s budget?

What combination of tax increases, spending cuts and borrowing do you think is required? Which taxes, which programs? What is the proper level of debt for the state to carry? If California’s debt level is too high, what are you going to do to reduce it? Does your plan have a prayer of winning support from enough of the opposition party to actually be implemented? What ideas do you have, beyond tired platitudes and knee jerk ideological sheep dip, for reclaiming control of the budget?

2. Do you have a serious plan to help create jobs in California?

How would you use the executive levers of state government to encourage and align with private business to generate economic development for green industries and building, alternative fuel sources and uses, digital, bio and nano technologies? What role should the University of California play in economic development? How important is state support of K-12 education, and what level of funding for public schools will you absolutely commit to? Should students who receive state aid to attend UCs and CSUs have a public service requirement? What is the role of the non-profit community in helping to grow the economy, and what relationship should the state have these groups?

3. What life experience do you have that proves your ability to work with a Legislature representing the breadth and depth of California?

What have you learned from watching Gray Davis and Arnold Schwarzenegger try and fail to force lawmakers to fall in line behind an agenda? What have you done that has prepared you for a job requiring an outsize ability to cajole, bully, stroke and persuade 120 raging egos who are accountable to small geopolitical units? Explain how your political skills have developed and candidly measure them against the non-stop cacophonous, complex and conflicting demands of being governor?

4. What is your plan for changing the dysfunctional structure of state government and what reforms will you fight for?

Should the state dump the two-thirds vote required to pass a budget? How about the two-thirds needed to approve tax measures? Should the standard be a 55 percent vote, or a simple majority? If you think we should keep the two-thirds standard, what is your political strategy for overcoming gridlock and getting to two-thirds? Do you think term limits have worked for California? If not how would you get rid of them? Do you support or oppose the open primary measure that will be on the June 2010 ballot?

5. Would amending Proposition 13 be on or off the table in your administration?

Do you think Prop. 13 should be amended to allow a split roll assessment system that taxes commercial property at higher rates than residential? What about the problem of neighbors with similar houses who pay wildly different tax bills because of when they bought their homes? Do you think this inequity should be addressed or not? If he or she is not willing to advocate a change, what significant income source can the candidate point to that will even begin to generate enough income to meet the state’s needs?

6. What actions, or inactions, do you propose to take on polarizing hot button issues?

How will you use the power and influence of the governor’s office to affect same sex marriage, abortion rights, offshore oil drilling and illegal immigrations, including the questions of drivers’ licenses, publicly financed health and education for undocumented workers and their families?

7. What kind of administration will you run in regards to special interests and the media, and what values and qualities will you seek in assembling a staff and making appointments?

How will you relate to the media and voters in terms of transparency, open government laws and documents? In your professional life, have you been open and accessible or closed, protected and isolated? Explain your past associations and future intentions regarding the California Teachers Association, the California Correctional Peace Officers Association, the Business Roundtable, the California Chamber of Commerce and other big interests in the Capitol? Who do you consult with and listen to? Why should voters trust these people in and around the Horseshoe?

Let us know what you think of these questions, and send us your suggestions for others the candidates should be required to answer.

Send email to calbuzzer@gmail.com.