Bloomberg News

Brown Seeks Vote by Californians on Raising Income, Sales Taxes

December 07, 2011

Dec. 5 (Bloomberg) -- California Governor Jerry Brown began a drive to place temporary income- and sales-tax increases before voters on the state election ballot next year, as a way to deal with a looming budget deficit.

Brown will submit his proposal to the state Attorney General’s office today, the governor said. If it qualifies, voters in November 2012 would decide whether to raise levies on individuals making $250,000 a year or more, or on couples earning $500,000 or better. The measure also calls for a 6.9 percent boost in the state’s sales-tax rate to 7.75 percent.

“I am going directly to the voters because I don’t want to get bogged down in partisan gridlock as happened this year,” the governor said today in an open letter.

Brown, 73, has said he would push for the ballot measure after failing to win legislative approval in June to extend $11 billion of higher taxes and fees, which have since expired. State officials have said that a sluggish economic recovery is unlikely to produce $3.7 billion in revenue Brown built into the current budget. A shortfall of that size would trigger automatic mid-year spending cuts.

The ballot measure would increase income levies for individuals making $250,000 to $300,000 by 1 percentage point, to 10.3 percent. For those earning $300,000 to $500,000, the rate would jump to 10.8 percent, both from 9.3 percent now, according to the Franchise Tax Board. For single filers with income topping $500,000, the rate would climb to 11.3 percent.

Current Rates

California currently taxes income of more than $1 million at 10.3 percent, with the additional 1 percentage point earmarked for mental-health services, under a 2004 initiative.

The Attorney General’s office must produce a summary and title for Brown’s measure before supporters can start gathering signatures needed to put it on the ballot.

The increases would raise an estimated $7 billion a year. Both would expire in 2017, according to the initiative. In crafting this year’s budget, which passed in June, lawmakers cut more than $12 billion in proposed spending to help balance the plan with projected revenue.

The state Legislative Analyst’s Office has said California may face a $13 billion deficit in fiscal 2013, which begins in July.

--Editors: Ted Bunker, Pete Young.

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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