Bloomberg News

Brown to Ask California Voters for Higher Taxes on Income, Sales

December 06, 2011

Dec. 1 (Bloomberg) -- California Governor Jerry Brown and his Democratic allies will seek a referendum to boost income and sales taxes to offset a looming budget deficit, according to a legislative aide with knowledge of the plan.

The November 2012 ballot measure would propose higher income taxes on individuals making $250,000 a year, or couples making $500,000, and raising the statewide sales tax by 0.5 percentage point to 7.75 percent, said the aide, who wasn’t authorized to discuss it on the record because it hasn’t been officially released. Both levies would expire in 2016, the person said.

Brown, 73, has been saying he would push a ballot measure after he failed to win legislative approval in June to extend $11 billion of higher taxes and fees that have since expired. The Legislative Analyst’s Office has said California may face a $13 billion shortfall in the year that begins July 1 and that the sluggish economic recovery isn’t likely to produce $3.7 billion in revenue Brown built into the current budget. That’s likely to trigger a round of mid-year spending cuts in addition to the more than $12 billion slashed in June.

Under the proposal, income taxes for those making $250,000 or more would increase by 1 percentage point, the person said. Those with incomes between $300,000 and $500,000 would see their taxes rise by 1.5 percentage points, while taxpayers earning more than that would see an increase of 2 percentage points. Combined, the increases in both levies would raise an estimated $7 billion annually.

Crowded Ballot

The November ballot, when voters also will chose the next U.S. president, is shaping up to be one of the most crowded in the state’s history. More than 30 individual measures are pending at the state Attorney General’s office, which must write a summary and title before supporters can begin gathering signatures. At least another 30 measures have already been cleared and are now circulating.

The California Federation of Teachers is pushing a ballot measure that would increase income taxes to fund education.

Molly Munger, a Los Angeles civil rights attorney and daughter of Berkshire Hathaway’s vice chairman Charles Munger, is pushing a broader income-tax increase to raise as much as $10 billion for education.

A group started and financed by billionaire investor Nicolas Berggruen, which includes Google Inc. Chairman Eric Schmidt, former U.S. Secretary of State Condoleezza Rice and former Governor Gray Davis, said it will seek ballot initiatives to overhaul the state’s structure, to adopt a tax on services and to ease corporate and personal income levies.

--With assistance from James Nash in Sacramento. Editors: Pete Young, Ted Bunker

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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