News Column

Will California Lead the Way in Axing No-tax Stances?

Nov. 27, 2012

James O'Toole

June 6, 1978, was D-day for the tax revolt movement that has been an enduring force in American politics for the last quarter-century.

That was when California voters overwhelmingly passed Proposition 13, the tax- limitation initiative that has sharply curbed the state's revenue while spawning a series of similar measures in other states.

The same impulse at the federal level manifested itself in the famed Grover Norquist anti-tax pledge, the Tea Party movement, and the Republican presidential candidates' unanimous affirmation in one primary season debate that they would not accept a deficit deal that included even $1 of new taxes for every $9 of spending cuts.

So it carried symbolic significance that when voters this month re-elected a president who pledged to increase taxes, Californians easily approved a proposition that increases income taxes on more affluent citizens while temporarily raising the state sales tax.

Across the country, voters in several other states approved other ballot questions that either raised taxes or turned aside proposals to impose limits on taxes.

Voters' decisions approving gay marriage in four states and recreational marijuana use in two attracted the most national attention this month.

But the bread-and-butter tax-and-spending questions on state ballots offered clues to voter sentiments at a time when the Obama administration and Congress are beginning to face off on the fiscal cliff in the federal budget.

"For several significant issues that were on there in November, voters were willing to raise taxes," said Roy Eappen, an associate analyst at Wells Fargo Securities Municipal Research Group.

California Gov. Jerry Brown, a Democrat, was in office when Proposition 13 passed over his opposition.

In his second stint as governor, he campaigned relentlessly for Proposition 30.

Its passage means that the state will be able to avoid nearly $6 billion in automatic spending cuts that threatened the state's public school system. The measure will increase the state's income tax for seven years while imposing an increase of one-quarter percent in the state's sales tax rate for the next four years.

"I know some people had some doubts, had some questions -- can you really get to people and ask them to raise their tax," Mr. Brown said, according to the San Francisco Chronicle.

He characterized the result as a statement by his constituents to "... raise our taxes for students, for our schools, for our California dream."

That is not to say that taxes have suddenly become popular, but a report by the Wells Fargo analysts noted that the California vote was not an isolated example.

"There were a smattering of tax increases passed to preserve local services, particularly education," they pointed out in a survey of Nov. 6 ballot questions.

Elsewhere in the country, according to the Initiative and Referendum Institute at the University of Southern California, Arkansas voters authorized a 0.5 percent sales tax to support transportation; Oregon rejected a proposal to end the state's inheritance tax while voting to devote excess corporate tax revenue to education, rather than refunding it to taxpayers as under current law; and Michigan voters, by a margin of 69 percent to 31 percent, rejected a proposal to require a two-thirds vote, rather than a simple majority, for legislative tax increases.

Aside from direct questions on taxation, voters were almost universally receptive to ballot questions authorizing new spending financed by debt. In its survey, the Initiative and Referendum Institute noted that "since the onset of the financial crisis and recession, legislatures have been cautious about proposing new bond issues."

Voters in various states approved a high of $13 billion in new bond issues in 2008; by 2010, that figure had dropped sharply to $2 billion. This year, voters in seven states were faced with decisions on $3.2 billion in capital spending through 16 separate bond questions. All but one was approved. The largest was the Arkansas transportation question supported by new sales taxes.

But the national picture on state tax questions was mixed. While embracing the Brown-supported tax increase, California voters rejected a separate initiative that would have imposed an even larger, though similarly temporary tax increase for education. Arizona rejected a call to make permanent a temporary sales tax increase from 5.5 percent to 6.5 percent that expires next year. South Dakota voted down a proposal to increase its sales tax from 4 percent to 5 percent that would have boosted funding for education and Medicaid.

In Washington state, voters imposed a new two-thirds super majority requirement for tax increases while at the same time agreeing to raise the state's debt limit.

Ross Baker, a political scientist at Rutgers University, described the overall national results on tax questions as "a modest turnaround."

"It's a little bit too much of a reach to say that some kind of great reversal has taken place ... I would, however, say that 2010 was the high-water mark of the anti-tax movement, the Tea Party."

He noted, however, that evidence of shifting sentiments on core spending questions could be seen in the acknowledgment by leading Republicans that new revenue would be part of any overall budget deal in Washington. He pointed to statements by a variety of prominent GOP figures distancing themselves from the Norquist no-tax hike pledge as "evidence of a definite change," in congressional dynamics.



Distributed by MCT Information Services



Source: (c) 2012 the Pittsburgh Post-Gazette


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