Another Round of California IOUs On the Way; Democratic Politicians and Unions (Not a Majority of Voters) Support Tax Hikes

California is about to run out of money again.

Here is the backdrop. Republicans who were against sending tax hike measures to the voters now are OK with it. What changed? Attitudes, that's what. Polls show voters are against tax hikes.

That's not the only thing that changed. Because of those polls, Democrats want tax hikes now, and a vote later.

That absurd idea is headed for defeat in the California House and Senate because Democrats are 2 votes shy in each chamber of ramrodding a tax hike through the state assembly that voters do not want.

Why do politicians want a tax hike if the voters don't? Because California public unions want them and politicians want public union campaign contributions.

California Republicans Block Brown?s Deficit Plan

Thank heavens for 2 votes because by that measure California Republicans Block Brown?s Deficit Plan

California?s Senate Republicans blocked Governor Jerry Brown?s plan to erase a $10 billion deficit as closed-door talks remain snagged on his demand for higher taxes as a deadline to pass a budget looms.

Republicans oppose the governor?s proposal because it would extend tax and fee increases set to end June 30. The so-called bridge tax would preserve the revenue measures pending the outcome of a voter referendum, planned for September or later, to keep them for five years. Republicans said the extensions would harm California?s economy. Brown said he doesn?t want to raise taxes without voter support.

?The Democrats have moved the goal post,? Senator Bob Huff, the Budget Committee?s Republican vice chairman, said in a telephone interview. ?Now they are saying they need the taxes and then they will let the voters decide. But if the voters say ?no,? they still get stuck with another nine months of taxes.?

Democrats are four votes short of the two-thirds margin needed under California law to raise taxes, lacking two votes in the Senate and two in the Assembly.

Controller John Chiang, a Democrat, has repeatedly warned Brown and lawmakers that California may run out of money if there?s no budget in place by July 1, forcing the state to issue IOUs, as it did in 2009. That?s because the state likely won?t be able to go to Wall Street for short-term cash borrowing until it has a spending plan that accounts for how it will be repaid.

The governor?s plan relies on retaining a 1 percentage- point boost in the retail-sales levy, to 8.25 percent, and a 0.5 percentage-point increase in vehicle registration fees to 1.15 percent of value. It also seeks to extend a reduction of the annual child tax credit to $99 from $309. All were put in place temporarily in 2009 and are set to expire by July 1.

Republicans, who initially opposed a statewide referendum on the taxes, have indicated they would be willing to allow a vote after polls showed voters would reject the extensions. The Legislature?s minority party wants lawmakers to pass a balanced budget now, without prolonging the revenue measures, and give voters the chance to reinstate the tax increases later.

?There?s no polling that shows this is going to pass,? Huff said. ?That?s why they want this bridge tax for a year.?

I would agree to an extension in tax hikes if I got something major in return. By major I specifically mean:

Pass legislation to make California a right-to-work state
Pass legislation scrapping defined benefit pension plans for public workers
Pass legislation to kill all prevailing wage laws
Pass legislation to end collective bargaining
Privatize state prison system
Pass legislation upping pension contributions of public workers

If I was in the California state assembly those would be my terms. Indeed, I would gladly take those terms. The benefits would be so huge such that no discussion of another tax hike extension would come for a long time.

Brown says he doesn?t want to raise taxes without voter support. He also calls for "no gimmicks". He is a liar on both counts. Voters do not want tax hikes, only politicians and unions want them.

If Brown does not want gimmicks, then why does he ask for them? If he wants to do something for the state instead of for the unions he can adopt my six-point proposal above.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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