Watch out, biz, if taxes lose in JuneTargeting commercial properties could be next
Business leaders on the fence on whether to push Republicans to join Democrats in putting tax extensions on the June ballot should consider what might happen if the measures fail. Democratic Sen. Joe Simitian is telling them they’ll probably face voter-led tax initiatives in November they’ll find far less palatable – an oil severance tax or even a challenge to Proposition 13 that raises property taxes on commercial property; it’s known as a split roll tax.
Simitian offered that pragmatic advice during an education forum for his constituents earlier this week in Palo Alto and then in a video interview with me. “I think there is common cause. Folks who are anxious about seeing targeted tax measures should be inclined to support this sort of broader-based approach that has all of us doing our share to make sure we fund things, like public education, that we all care about,” he said. (Update: Gov. Jerry Brown is reaching out to key business leaders; they may want regulatory reform in exchange.)
Brown is proposing to solve a $25.5 billion state budget shortfall by cutting state programs by $12.5 billion and extending taxes and by raising revenue for the other half. The biggest piece would be to extend three temporary taxes for five years, on sales, income, and vehicle licenses, to raise $8.8 billion each year. The governor needs five legislators to agree to put it on the ballot, but so far none has.
Though California is the nation’s third-largest oil producer, it’s the only significant oil-producing state not to tax oil as it comes out of the ground. In 2006, in a different economy, voters said no. An oil tax could raise about $1 billion in California.
A split roll tax would recognize that many owners of commercial property have sold their properties without paying any taxes. That’s a reason why in some counties, residential properties have borne a significantly higher share of taxes than at the time of Proposition 13.
Simitian said the consequences on K-12 schools if the ballot measure fails would be calamitous. The Brown administration is saying only that schools would lose at least $2 billion, what it would take to fund the minimum for Prop 98 during good years. But Simitian predicts the final cuts would be more like $5 billion. That’s based on the assumption that Brown would cut programs proportionally; K-12 consumes about 40 percent of the state budget.
A cut of $5 billion would be about $800 per student, and come after three years of budget cuts.
Simitian will be back with an alternative he has failed to get through the Legislature several times over the past decade: a constitutional amendment making it easier for school districts to pass a parcel tax, by lowering the threshold needed to pass from a two-thirds majority to 55 percent. Here again he has not found enough Republican support to put the question before voters.
“If we are not able or willing to fund public education on an adequate level ona statewide basis,” he said, “the least we can do is give local school districts a tool they can do to get it done themselves.”
Simitian said he remained “cautiously optimistic” that Brown will find enough votes to put the tax extension on the ballot.
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