On July 14th, the IRS held a public hearing for the debt-equity rule (section 385 of the IRS code) that the Treasury Department proposed last April. The hearing, which had as many as 16 speakers from various industries,...
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- California Governor Attempts to Shut Down Washington Monu...
California Governor Attempts to Shut Down Washington Monument
Last Thursday, California Governor Jerry Brown (D) introduced a budget for FY 2013 that relies on voters approving the tax increase that he has placed on the November 2012 budget. If voters in November do not vote to increase taxes, the budget plan would fall back on "trigger cuts" to the tune of $5.4 billion.
There may be some political posturing involved in this budget, as the trigger cuts would fall disproportionately on popular programs (or even core functions of government) like education, courts and public safety. Funding would not be in danger for new "bold moves; investments in high speed rail, in water, and greenhouse gas reduction, alternative energy," said Brown in a press conference (at 4:00).
This budgeting tactic is known as the "Washington Monument Ploy," a political game where politicians threaten to cut sympathetic programs unless they are given the additional revenue they desire. The stunt gets its name from a 1969 incident where the director of the National Parks Department closed the Washington Monument and the Grand Canyon for two days per week. Complaints rolled in, and the funding was reinstated.
Some of my favorite Washington Monument moments:
Zoo May Close, Euthanize Animals: In 2009, a Boston Zoo claimed it would have to euthanize 20% of their animals if their budget was cut.
Zakim Memorial Bridge Turns Off Lights: The Massachusetts Transit Authority opted to turn off the lights that adorn the scenic Zakim Bridge, a famous part of the Boston skyline, to save a whopping $60,000 per year. Onlookers noted that the agency could save over $60,000 by laying off just one toll-taker.
Toilet-Paper Shortage: The Detroit school system claimed in 2009 that budget cuts had forced them to beg parents to send their children into school with toilet paper, because they did not have the funds to provide it.
The Washington Monument ploy might be particularly effective in this case given the structure of Brown's tax hike proposal. Though the sales tax will fall on all consumers (and is actually slightly regressive), the income tax hike falls disproportionately on higher incomes. Income above $1 million would be taxed at the highest state rate in the nation: 12.3 percent. Using pathos to sell a tax increase might be easy, but is even easier to sell to voters when they can "tax the fellow behind the tree."
Our coverage of recent California budget events:
- November 16: Revenues fall short of expectations, trigger sequestration cuts.
- December 2: Reports emerge of Jerry Brown's new tax proposal.
- Early December: Five tax increase initiatives vie for a spot on the November ballot.
- December 10: Mark Robyn and I talk to Wall Street Journal about progressivity in California's tax code.
- December 12: Poll reports 65 percent of Californias support Jerry Brown's tax plan.
More on California here.
Follow Scott Drenkard on Twitter @ScottDrenkard.
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