New California Governor Proposes Initiative to Extend Tax Increases

January 3, 2011

In February 2009, California approved its budget, including a temporary increase in income and sales taxes, designed to enable the state to balance its budget. The income tax increases—0.25 percentage points on each tax bracket—expired on December 31, 2010. The sales tax increase-1 percentage point-will expire on July 1, 2011, as will a higher vehicle license tax (from 0.65% to 1.15%).

Officials around newly sworn-in Gov. Jerry Brown (D) are hinting that he will seek a ballot initiative to re-enact the income tax increase and extend the sales tax increase. From the Los Angeles Times:

Gov.-elect Jerry Brown is readying a budget plan that would call for a special election to ask voters to extend the soon-to-expire tax hikes, according to people involved in the discussions.

“I have a hard time seeing that they let go of this revenue,” said Esmael Adibi, director of Anderson Center for Economic Research at Chapman University.

I haven’t seen a revenue estimate on how much the increases would bring in, but in 2009, the income tax increase was estimated to bring in $3.8 billion over two years, the sales tax increase $8.6 billion over two years, and the vehicle license tax increase $2.9 billion over two years.

Gov. Brown had pledged during the campaign to submit all tax increases to voter approval. I give him credit for living up to his pledge and not calling the sales tax extension an “increase,” as he might have.

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