California’s Proposition 30 Passes; Has the “Redistribution” Die Been Cast?

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Tax Increases: The Ideological Battle

They can shake hands, but can Obama and Boehner work together? Image credit: Pete Souza, Executive Office of the President of the United States

Like the national debate between Democrats, who favor a balanced approach blending increased taxes and spending cuts and Republicans who do not believe taxes should be raised on ‘job creators’, the positions in California fell along similar battle lines.

In the end, however, the state’s Democratic tilt and large percentage of both Hispanic as well as younger voters helped carry the day for proponents of the measure.

The state’s key voter metrics — energized young people, an increasing Hispanic population, and an increasingly disenfranchised middle class — are the  same basic coalition that helped propel President Obama to re-election.

Although still opposed by a majority of Republicans, the temporary elements of the tax increases on wealthy Americans undoubtedly made it more palatable for moderate voters, including the critical independent segment.

Prop. 30 Passed: What’s the Financial Impact?

As mentioned above, Proposition 30 is projected to increase California’s tax revenues by $6 billion annually. Given the projected $15 billion shortfall, the bill will not, by itself, close that gap. However, it provides a measurable, substantial improvement to the state’s fiscal picture. More importantly, it eliminates education-specific cuts scheduled to be implemented, at the cost of a 1/4 cent increase in the state sales. Only high-income earners will see their income taxes increase as the result of the  measure.

Speaking in regards to those who believed the measure would never pass, Brown said: “Some people began to read tea leaves incorrectly. And then you all go off like a herd of buffalo down the road. Hopefully you’re all now back on the plane of common sense.”

U.S. Budget Crisis and Politics as Usual

The battles will be waged in the House of Representatives, where Republicans maintained control after the November 7 elections. Image courtesy of the U.S. Federal Government

Although both Republicans and Democrats made conciliatory statements after the November 7th elections, each has firmly drawn the line once again at their respective positions.

Raising tax rates is unacceptable,” said Speaker of the House John Boehner. “Frankly, it couldn’t even pass the House. I’m not sure it could pass the Senate.

Meanwhile, President Obama made it clear he would not back down from his stance, stating that asking the wealthy to pay “a little more” would help to “reduce the deficit and still make investments in things like education and training, and science and research.”

In a possible sign of a schism in the Republican party,  Rep. Tom Cole (R-Okla.), a member of the House Budget Committee, admitted that this election was “a referendum on taxes” for the wealthy.

Prop 30 and the Federal Budget: Blueprint for Success?

Proposition 30 provides a possible road map for compromise, as it carries a four-year limit in the sales tax increase and seven-year additional marginal tax increase of 10.3%, 11.3% and 12.3% on income brackets of $250,000-$300,00, $300,000-$500,000, and above $500,000 respectively.

Neither side has indicated they were willing to give on the central issues. To avoid the fiscal cliff, however, politicians will have no choice but to do so. Will the compromises in Prop. 30 be the answer?

Stay tuned.

Resources

Kingkade, Tyler. Prop 30 Passes in California: Voters Support Gov. Jerry Brown’s Tax Measure for Education Reform. (2012). The Huffington Post. Accessed November 9, 2012.

Oliff, Phil. State Continue to Feel Recession’s Impact. (2012). Center on Budget and Policy Priorities. Accessed November 9, 2012.

Parkinson, John. Boehner Exclusive: Raising Taxes ‘Unacceptable’ but Will Put New Revenue on Table(2012). ABC News. Accessed November 9, 2012.

Tanden, Neera. President Obama’s Mandate for Fairness. (2012). The New Republic. Accessed November 9, 2012.

Rosenburg, Mike. Proposition 30 Wins: Gov. Jerry Brown’s Tax Will Raise $6 Billion to Prevent School Cuts. (2012). San Jose Mercury News. Accessed November 9, 2012.

Halper, Evan and York, Anthony. Prop. 30 win gives Jerry Brown major boost. (2012). Los Angeles Times. Accessed November 9, 2012.

California General Election Voter Guide. Proposition 30. (2012). Accessed November 9, 2012.

Zillow. California Home Prices and Home Values. (2012). Accessed November 9, 2012.

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