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article imageCalifornia Gov. Jerry Brown proposes tax hikes and budget cuts

By Larry Clifton     May 14, 2012 in Politics
As Governor, Jerry Brown is blaming the state's economic woes on poor revenues and over-spending by others while proposing new spending, massive cuts and a two-pronged tax hike for the future.
Californians may not have “Arnold” to beat up on anymore, but they may wish they had him back if Governor Jerry Brown slashes $8.3 billion from every part of the state budget, increases the sales tax and raises taxes on the "rich.” Brown also proposes cutting the pay of state workers.
Brown's tax hike would hit anyone earning more than $250,000 a year. Brown, a liberal Democrat, has borrowed the “tax-the-rich” theme from Barack Obama to make up for overspending during a poor economy.
California Governor Jerry Brown believes he can solve the state's spending crisis that includes a $16 billion deficit by going after high earners. However, analysts say significant tax hikes during a period of stagnant jobs growth could do more damage to the state than good.
The governor proposed his new budget plan that includes more spending Monday and in a YouTube video. Brown proposed an increase in funding for K-12 education provided voters approve his proposal to increase the state’s sales tax on everyone along with hiking income taxes on “the rich.”
"We can't balance this budget with cuts alone," he said. "The budget I'm proposing will boost funding for education, protect public safety and prevent an even deeper round of trigger cuts."
Brown has championed tax hikes since he took office in January 2011; Republican legislators blocked his efforts last year. Democrats have controlled the California House and Senate for many years.
Brown would levy a 3 percent tax increase on those earning more than $250,000 which affects about 1% of taxpayers. Analysts warn that tax hikes will put a damper on economic growth and small business owners may need to cut back on employees to cough up more cash for state.
Brown also wants to raise California's sales tax by a quarter of a point starting in January and lasting through 2016, however most analysts agree that once the state approves a sales tax increase it never goes away.
That would bump up the average state sales tax rate to 8.4%. Brown claims his proposal would bring in $8.5 billion. Brown warned voters that an additional $6 billion would be slashed on January 1, 2013 if they don’t approve his proposal.
California's current budget took into account a $4 billion increase in state tax revenues that never occurred. The state is $3.5 billion below estimates; the bulk of the shortage was in personal income taxes, according to the controller's office.
Asked at a press conference whether this week's Facebook's IPO would brighten the state's fiscal outlook, Brown responded: "Who knows? That's Wall Street."
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