New Year’s blues: Few signs of another tax ‘revolt’

measuring pension concept

We know the story by now. The public was fed up with a dysfunctional government that was awash in debt and mismanagement. The Democratic administration was fixated on imposing liberal social policy and lavishing benefits on those inside the “swamp,” but couldn’t even handle its most basic responsibilities. Voters turned to a flawed political outsider and nominal Republican who promised to shake up the entire political culture.

I’m not referring to the November 2017 election of President Donald Trump, but to the October 2003 recall of California Gov. Gray Davis and his replacement with political neophyte Arnold Schwarzenegger. It wasn’t hard to understand the frustration. The deficit topped $34 billion. A horribly designed electricity “deregulation” plan led to rolling blackouts. At the same time, Davis was handing out massive raises and benefit hikes to his union allies.

That was the last time California voters showed any rambunctiousness and independence. The next time the state faced budget deficits and pressure to deal with its intractable problems was in 2012. But Gov. Jerry Brown convinced Californians to “fix” the mess by imposing income- and sales-tax increases. After proving themselves to be chumps, California voters have seen no government reforms, budgets that set spending records, and more tax increases.

In 2014, the Republican congressional midterm rout stopped at the Sierra Nevada. Likewise, the Republican victories in 2016 left nary a ripple here. Nationwide, Hillary Clinton received 2.9 million more votes than Trump — but had a 4.3-million vote margin in California. Americans showed their anger, while Californians just shrugged.

The state’s hard Democratic tilt endures despite ballooning pension debt, the nation’s highest poverty rate(using the Census Bureau’s cost-of-living-based formula), crushing tax burdens, an exodus of middle-class residents and crumbling infrastructure. As the New Year approaches, is there any chance for a renewed sense of feistiness and rebellion within the nation’s most populous state? There are some rumblings, but probably not.

The state’s leadership has treated the GOP tax bill in predictable fashion.  Brown has called it “evil in the extreme” and claims that it will tank the economy. If Brown really is concerned that the law will further divide blue states from red states because it eliminates the state income-tax deduction, he and his allies can give Californians a corresponding tax break when they get back to work next month. Of course, that could never happen from a group that sees tax increases as the best way to jump-start an economy.

In April, Brown and the Legislature cobbled together a two-thirds majority to increase gas taxes, diesel taxes and vehicle-license fees to upgrade California’s decrepit system of roads, bridges, and freeways. In a well-run state, infrastructure should be a top priority. In California, Democratic leaders hold such funding hostage. They squander the budget on expanded social programs, then declare that there’s no money left to deal with congestion — unless voters agree to yet another tax hike.

In a well-run state, political leaders try to stretch the available dollars by rooting out waste and by outsourcing projects. In California, Brown and his allies shrugged at a state audit showing that thousands of Caltrans workers have little to do. They pass laws that limit outsourcing and force more of its infrastructure work to be done by full-time state employees. They expand benefits for union workers and refuse to reform a pension system that saps money that could be used to pour concrete. Our per-mile road-building costs are among the highest in the nation.

A new Berkeley Institute of Governmental Studies poll offers a glint of encouragement, however. By a 52 percent to 43 percent margin, polled likely voters support a proposed statewide ballot initiative that would repeal the unpopular gas tax. The pollsters found that nearly all of those favoring a repeal have strong opinions on the matter. This is true even though most surveyed voters agree that the state’s roads are not in good condition.

Meanwhile, Republicans continue to push a recall election of state Sen. Josh Newman, a Democrat from Orange County, because of his vote in favor of the gas-tax hike. They are targeting a freshman senator in a Republican-heavy district where they have a fine chance of success. Democratic officials passed two laws that changed the recall rules in an effort to save his seat, but those efforts did little more than delay the ultimate vote.

Their latest ploy is to try to push the election to a June primary, where Democratic turnout is high, rather than a special election, which would bring out a higher percentage of anti-Newman voters. All of a sudden Democrats are complaining about government spending by saying that a special ballot would be too expensive for taxpayers. Gov. Brown will decide in early January when to schedule the recall.

Despite these tactics, it seems likely that voters will bounce Newman. That would cost Democrats their Senate supermajority. They recently lost (temporarily, anyway) their Assembly supermajority after two Democratic members announced their resignations amid sexual-misconduct allegations and one left because of health issues. In California, supermajority votes are need to pass tax increases, so this is a significant battle.

Apparently, California voters can still show a little anger when it comes to pocketbook issues, but barring the emergence of some other hot-button issue or fiscal crisis, it’s unlikely this “revolt” will resonate beyond their frustration at paying sky-high prices at the pump. And the latest gubernatorial public-opinion polls are bleak for anyone who thinks that the state will be more conservatively run after Brown heads into the sunset.

San Francisco Democratic Lt. Gov. Gavin Newsom holds a significant lead over former Los Angeles Mayor Antonio Villaraigosa, also a Democrat. Both Republican candidates, businessman John Cox and Assemblyman Travis Allen of Huntington Beach, are polling in the single digits. There’s a lot to criticize in Brown, who has signed budgets that set spending records, expanded the costly cap-and-trade system, and acquiesced to many union demands, but he has at least held the line on some of the most far-fetched proposals.

Newsom’s likely victory would signal a move to the Bernie-crat Left. His victory would usher in a push for single-payer health system, even though the Senate estimates that the latest proposal would cost more than the entire state budget. He’s also an advocate for more gun control.

A Villaraigosa victory would be bad news, too. He is trying to take some relatively moderate positions (on school reform, for instance), but he also has called for “reform” of Proposition 13, 1978’s property-tax limiting initiative that has kept the lid on property tax rates. As I wrote for the Spectator last week, liberal interest groups are circulating a statewide initiative for the November 2018 ballot that would institute a split-rolls — i.e., reassess those properties at market rates, thus slapping an $11 billion tax hike on business property owners. It’s telling that Prop. 13, which spurred a nationwide tax revolt, is now in danger.

While state leaders argue about which programs to expand, California’s pension debt continues to soar. Pensions and unfunded medical costs for public-sector retirees continue to crowd out public services. Local governments are increasingly looking to tax increases to help afford their pension payments. Local officials won’t ever put a pension tax on the ballot, but will offer “public safety” taxes and “parks and recreation” taxes that are designed to plug the pension hole. There’s little chance that California voters will reject these measures, if past elections are any guide.

For the New Year, then, expect the state to move even further Left. Public services will be pared back at the state and local level. Debt will rise. Taxes will go up. Democrats will regain their Assembly supermajority given the Democratic lean of the vacant districts. Conservative-minded Californians will flee to other states. Democratic officials will continue to serve as the Trump Resistance, as they pursue 22 lawsuits against the administration. The unions will continue to control the Capitol and squelch all efforts to reform the Sacramento swamp.

Republicans might gain some traction over the gas tax. But unless there’s an economic downturn and the state’s capital-gains-dependent finances go belly up, there’s little hope that we’ll see a replay of 2003. That’s too bad. Even though Schwarzenegger failed in his efforts to “blow up the boxes” of state government, it’s past time to try again.

 

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