The latest trend from California: How to sell a tax hike

Animation of Republican and Democratic party symbols
January 14, 2013

This is an exerpt from the Robert T. Matsui Center for Politics and Public Service Director, Ethan Rarick's article in a recent edition of the Institute for Research on Public Policy Policy Options Journal. 

 
President Barack Obama may have carried California by a whopping 20 percentage points in November, but he wasn’t the only election night winner in America’s largest state. Democratic Governor Jerry Brown had every right to be just as jubilant. Brown’s Proposition 30, a statewide initiative to raise taxes by roughly $6 billion a year, pulled ahead early in the evening and went on to win with 55 percent of the vote.
 
The measure had become the centrepiece of Brown’s governorship, and even opposition Republicans acknowledged it was a coup. Jim Brulte, who once led Republican forces in the California state legislature and who is eyeing a comeback as chair of the party, told reporters, “It’s a huge victory — underline huge— for Jerry Brown.” Brulte was undoubtedly correct, but the tale of California’s great tax increase of 2012 may serve as not only a sign of the governor’s electoral craftiness, but also a template for politicians everywhere looking to sustain critical public programs by overcoming entrenched opposition to new revenue.
 
California’s tax aversion runs deep, and it is a history that Brown knows personally. In the 1970s, he was the boy wonder of American politics — the son of a California governor, he followed in his father’s footsteps when he was only 36. His first run for president, a surprisingly strong bid in 1976, came when he was not yet 40. But a huge run-up in California real estate prices was unsettling the governor’s constituents. As assessments went up, so did property tax bills, in some cases at shocking speed.
 
The result was Proposition 13, a 1978 measure to cap property tax rates at 1 percent of assessed value and limit the increase in assessments to just 2 percent a year. In short order, Proposition 13 spawned a slew of imitators in other states and ushered in a long era of antitax rhetoric in the Republican Party. The man who preceded Brown as California governor, Ronald Reagan, rode the wave all the way to the White House.
 
Within the state, another provision of Proposition 13 may have been just as important. In addition to limiting property taxes, the initiative mandated that bills increasing any kind of taxes needed a two-thirds vote to pass the Legislature. In practice, of course, this granted veto power over taxes to one-third of the Legislature, and minority Republicans used it vigorously. California’s antitax reputation was only strengthened in 2003 when voters recalled Governor Gray Davis, who had allowed motor vehicle registration fees — derided as the “car tax” — to go back up after a temporary cut, and again in 2006, when Democratic gubernatorial nominee Phil Angelides proposed a tax increase on the wealthy, only to be roundly rejected by the voters.
 
 

For Rarick's complete analysis, please visit the IRPP archives.

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