UPDATE 5:03pm – Based on some e-mail traffic, it would appear that I need to be more specific on what I was told on this. Besides what I said below, Morgan conveyed that this idea is not one that has been floated by Assembly Republicans, and that, to be clear, Republicans would not put up votes on a budget (that requires a two-thirds vote) if the Democrats separately pass this scheme (which they can do by a majority vote if they wanted).
Sometimes there are complex policy issues that come up that are difficult to distill in a blog-length post. But I am going to try to explain. But let me place the conclusion first, and the details afterward. Basically, there is some talk in the Capitol that there is a way to raise local sales taxes by .25 percent by just a majority vote (I’ll explain below), and that doing so would bring in $1.4 billion in new tax revenue. Some of the “chatter” was that this proposal might get “sign off” from Republicans in a budget deal.
Not true. I spoke with Morgan Crinklaw, Communications Director for Assembly Republican Leader Mike Villines, who checked with his boss, and then told me that Villines said that Assembly Republicans would not support such an idea, nor would they support a budget that included it as part of a package. That’s the bottom line.
OK, so more detail for those who want to know more?
What I heard is that there was a scheme afoot to alter a 2003 budget compromise known as the “triple flip” that would increase the local sales tax by ¼ percent.
In 2003, Republicans agreed to the “triple flip” in order to pay back $15 billion in deficit reduction bonds. It was a complicated system that gave the Democrats a state tax increase and provided Republicans with a tax cut, making the plan revenue neutral.
Here’s how it worked:
Flip 1: It increased the state sales tax by ¼ percent.
Flip 2: Then it repealed the local sales tax by ¼ percent making “Step 1” revenue neutral.
Flip 3: The state guaranteed it would make up for the lost local revenues by reallocating property tax revenues from the Educational Revenue Augmentation Fund (ERAF), a mechanism that shifted property taxes from local government to schools.
The (now doomed, thanks to the resolve of Assembly Republicans to oppose any and all tax increases) proposal would have implement a “single flip” to help solve this year’s budget crisis. The “single flip” proposal would have eliminated the ¼ percent decrease in the local sales tax and taken back the property taxes that were used to backfill the tax cut. The result: a permanent $1.4 billion increase on hardworking Californians.
A tax increase alone is enough to make the blood of a fiscal conservative boil, but to push for one that only requires a majority vote undermines the valuable role the 2/3’s vote requirement plays in both tax increases and the budget process.
Hopefully this post clarifies the issue, and makes it clear to all that this end-run on the 2/3 rule won’t cut it with Assembly Republican Leader Villines and his caucus. I should close by saying that I did not reach out to Senate Republicans on this once I heard from Villines. Since the point was rendered moot.