Cal­i­for­nia bud­get: More than $2B in new taxes even with $21B sur­plus?

Lodi News-Sentinel - - PAGE TWO - By John Wool­folk

Gov. Gavin New­som is in an en­vi­able po­si­tion: a record sur­plus of $21.5 bil­lion in his first pro­posed bud­get.

But as his plan moves to­ward the June 15 dead­line for ap­proval by a friendly Leg­is­la­ture dom­i­nated by his fel­low Democrats, Re­pub­li­cans and tax­payer ad­vo­cates are push­ing back against what they say are more than $2 bil­lion in new taxes and other levies tucked within the vo­lu­mi­nous doc­u­ment.

“De­spite a bud­get sur­plus of $22 bil­lion,” the gov­er­nor is ask­ing for bil­lions in new taxes, said Se­nate Re­pub­li­can Leader Shan­non Grove, R-Bak­ers­field. “Cal­i­for­nia is al­ready un­af­ford­able for too many peo­ple.”

The bulk of that rev­enue comes from $1.7 bil­lion in “tax con­form­ity” pro­pos­als to align Cal­i­for­nia’s tax rules with the ma­jor changes made to the fed­eral tax code by Pres­i­dent Trump and Re­pub­li­cans in Congress in late 2017.

The bud­get also in­cludes $300 mil­lion from a health in­sur­ance man­date — a tax penalty aimed at keep­ing in­sur­ance pre­mi­ums in check by spurring the healthy who spurn cov­er­age into buy­ing a plan — and $200 mil­lion from a re­vised tax to bol­ster the 911 emer­gency sys­tem, Grove said.

An­other New­som pro­posal to raise $200 mil­lion from taxes on wa­ter bills, milk and fer­til­izer to fix con­tam­i­nated drink­ing wa­ter sys­tems in dis­ad­van­taged com­mu­ni­ties around the state died in a leg­isla­tive com­mit­tee over the week­end.

Kevin Liao, a spokesman for Assem­bly Speaker An­thony Ren­don, coun­tered that much of the sur­plus goes to­ward bol­ster­ing bud­get re­serves and pay­ing down debt and pen­sion li­a­bil­i­ties so the state can bet­ter weather an even­tual eco­nomic down­turn. He said the crit­i­cism is pre­ma­ture with the bud­get still in fi­nal ne­go­ti­a­tions over the next week.

“It’s not that there’s a ton of new on­go­ing spend­ing be­ing pro­posed,” Liao said. “A lot of it is one-time spend­ing.”

De­part­ment of Fi­nance spokesman H.D. Palmer quib­bled with the char­ac­ter­i­za­tion of some of those mea­sures as taxes, which re­quire a twothirds vote for ap­proval. He said the Leg­isla­tive Coun­sel con­cluded a third of the dozen mea­sures in the tax con­form­ity pack­age can be ap­proved on a sim­ple ma­jor­ity vote.

Palmer said he ex­pects the Leg­isla­tive Coun­sel to make a sim­i­lar find­ing on the health in­sur­ance man­date, though he con­ceded the pro­posed 911 mea­sure will re­quire twothirds votes.

The bud­get sur­plus and tax talk are in stark con­trast to the sit­u­a­tion former Gov. Jerry Brown con­fronted when he took of­fice in 2011. Brown faced a $26.6 bil­lion deficit. He re­sisted the Leg­is­la­ture’s call for new taxes, and the ap­proved bud­get in­cluded some $15 bil­lion in cuts. Brown later won voter ap­proval for new taxes and, along with the im­prov­ing econ­omy, the state’s fi­nances turned around.

Democrats now have enough votes to pass taxes over GOP op­po­si­tion. Though New­som cau­tioned about the threat of an­other re­ces­sion, for now the state’s cof­fers are over­flow­ing.

New­som’s bud­get de­scribed the tax con­form­ity pack­age, which would in­clude “flex­i­bil­ity for small busi­nesses, cap­i­tal gains de­fer­rals and ex­clu­sions for Op­por­tu­nity Zones and lim­i­ta­tions on fringe ben­e­fit de­duc­tions,” among other mea­sures, as “ben­e­fi­cial to Cal­i­for­nia.” Those pro­pos­als have not been agreed on by the leg­is­la­ture and are ex­pected to be de­bated in the com­ing days. The gov­er­nor wants to use the rev­enue to pay for an ex­pan­sion of tax cred­its for low-in­come Cal­i­for­ni­ans.

Some tax­payer ad­vo­cates have with­held crit­i­cism on the con­form­ity pro­pos­als for now, which they say of­fer po­ten­tial ben­e­fits in sim­pli­fi­ca­tion for tax­pay­ers.

“The con­form­ity pack­age is in­tended to be tax neu­tral — mean­ing the over­all ef­fect is that it does not in­crease taxes or de­crease taxes on tax­pay­ers in the ag­gre­gate,” said Cal­i­for­nia Tax­pay­ers As­so­ci­a­tion Pres­i­dent Rob Gutier­rez.

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