Monday, June 13, 2011

Plan to expand taxes knocked

SACRAMENTO - Now that Republican lawmakers have voted against a renewal of expiring tax hikes, Democrats are turning to another, more complex way to generate revenue.

A bill proposed by state Senate President Pro Tem Darrell Steinberg and narrowly approved last week would dramatically expand the taxing powers of local governments, school boards and other jurisdictions.

But the bill, SB23-1X, would lead to such a complicated latticework of taxes that opponents say Steinberg is merely pulling a stunt to ramp up pressure against Republican lawmakers.

The Sacramento Democrat said his legislation would give public schools and law enforcement agencies a firmer source of funding if lawmakers don't come up with one directly.

It would grant sweeping authority to local governments to raise money, with voter approval, through taxes on income, vehicles, alcohol, tobacco, medical marijuana, soda and companies that pump oil in California.

Steinberg introduced his local tax proposal on Friday, soon after the defeat in the Senate of the main bill to renew temporary increases in the statewide sales and vehicle taxes that will expire June 30. It passed, but with only the bare 21-vote majority needed. One Democrat voted against it and three others abstained.

The bill applies to counties, school districts, community college districts and county offices of education. Critics said it would create a logistical nightmare of inconsistent tax

policies that likely would be challenged in court and with a ballot referendum seeking to repeal it.

Those obstacles, in addition to its uncertain prospects in the Assembly and with Gov. Jerry Brown, make it clear that Steinberg's bill is more than a funding tool. Steinberg acknowledged to reporters that he was using the legislation to pressure Republicans, who are the minority in both houses but whose consent is needed to pass tax increases.

"I felt it was important to pass this early because it does show that if the minority party, which holds some of the cards here, does not provide bridge funding for schools and for public safety agencies, that the majority party will fulfill its responsibilities," Steinberg said.

The governor has asked lawmakers to extend the 2009 sales and vehicle tax hikes through September, when he wants a special election to ask voters to renew them for five years and reinstate a personal income tax increase for four years. Extending the tax hikes and calling a special election require a two-thirds vote in the Legislature, but so far the Republican votes needed to reach that have been non-existent.

Californians have been paying an extra 1 percent in sales tax, a half-percent more for vehicle licenses and a quarter-percent higher income tax rate for two years. Some tax filers also have received a lower tax exemption for dependents. All the tax hikes end by June 30, although the income tax increase is already expired.

Several Republicans in the Assembly and the Senate have been negotiating with Brown to let Californians decide on tax renewals in a special election. In exchange for their votes, the GOP lawmakers want a spending cap and pension and regulatory reforms.

As for local taxation, Steinberg has not sent his latest bill to the Assembly in the hope that he can strike a deal with Republicans. GOP senators said Steinberg's bill would put the state at further disadvantage in attracting and keeping businesses.

"If this bill is implemented, you better buy some U-Haul stock," said Sen. Tony Strickland, R-Thousand OaksZZVEN, "because what's going to happen is, jobs are going to escape in droves."

He said the bill, which passed 21-16, violates the voter-approved requirement that tax measures receive two-thirds support in the Legislature. Strickland predicted a voter referendum if Steinberg's bill becomes law, and the Howard Jarvis Taxpayers Association said it would gather petition signatures if the time came.

Association president Jon Coupal acknowledged it might be hard to dispute the legality of the bill in court because it does not increase taxes directly. He said Democrats were using it primarily to threaten Republicans into signing on to a legislative tax extension.

"Steinberg is waving a gun around, but everyone knows it's unloaded," Coupal said.

Even if the bill makes it out of both houses, Brown's approval is not certain.

When Brown served as governor the first time, voters approved Proposition 13 in 1978, a landmark initiative that rolled back property taxes, capped their annual increases and changed California's political calculus by shifting much of the state's power to the electorate.

Signing Steinberg's bill could set the stage for an ugly round of lawsuits and anti-tax ballot initiatives at the state and local levels, adding yet more uncertainty in an era when municipal budgets are strained and local services facing deep cuts.

Brown is not entirely on the same page as his fellow Democrats in the Legislature, which must pass a balanced budget by Wednesday or give up salary and per-diem payments under a recent voter-approved initiative.

The governor wants to close the state's remaining budget gap of $9.6 billion by renewing the 2009 tax hikes for at least three months, not a full year. The extension would last until a special election on taxes, which he hopes will be called for September.

But Democratic legislators want the extension of the sales and vehicle tax increases to last a year so schools can plan their budgets before classes resume.


Kim Yoon jin Lil Kim Jessica Biel Laura Harring Sara Foster

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