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Californians Debate Taxing The Wealthy To Save Schools

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Corporate Taxes, U.S. Economy, Government, Budget

(AP)

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SACRAMENTO (CBS/AP) — Taxing the rich more to benefit others isn’t a new idea, but it has emerged in recent weeks as a potential solution as California tries to salvage its public education system from deep budget cuts.

Public schools escaped the first round of budget actions that shaved $11.2 billion off the state’s $26.6 billion deficit in March. But they have been threatened with billions of dollars in cuts since Gov. Jerry Brown failed to persuade Republican lawmakers to support a special election calling for a renewal of expiring tax increases.

If those tax hikes are not extended, Democrats say thousands of teachers will lose their jobs, the school year will be shortened, class sizes will increase and even more programs will be reduced or eliminated. It’s not clear whether enough Republicans will sign on to that plan in time for a special election this year, or even if voters would approve.

What voters do seem to support are higher taxes on the rich.

“The average voter inclination is to go to the wealthy because they can afford it,” said Mark Baldassare, president of the Public Policy Institute of California. “That has traditionally been among their favorite solutions to deal with the state budget shortfall.”

The institute released a poll in April showing that most California adults want to save schools by increasing taxes — just not on themselves. Among likely voters, 62 percent oppose raising the sales tax and 66 percent oppose raising the overall income tax — the options preferred by the governor and Democratic lawmakers.

But 62 percent say state leaders should tax the top income bracket.

This is the first year Baldassare has seen that solution linked to education funding. Assemblywoman Nancy Skinner, D-Berkeley, has a bill to make that happen.

Her AB1130 would tack another 1 percent onto the tax rate of any taxable income over $500,000, applying to single and joint tax filers. Skinner, who will present the legislation Monday to the Assembly Revenue and Taxation Committee, estimates it would bring the general fund an extra $2.3 billion each year from 30,000 filers.

“The wealthy should pay their fair share; it wouldn’t affect them that much,” said Joshua Pechthalt, incoming president of the California Federation of Teachers.

The union supports Skinner’s legislation. The state’s largest teachers union, the California Teachers Association, coordinated a statewide series of protests this week over looming education budget cuts but has not taken a position on the proposed wealth tax. Instead, it supports the Democrats’ plan to extend for five years the increases enacted two years ago to the personal income, sales and vehicle taxes.

Those tax increases are scheduled to expire by June 30.

Preliminary pink slips already have been issued to 20,000 teachers and other school employees. While many of them ultimately will retain their jobs, the number of pink slips illustrates the uncertainty over school funding levels for the coming year.

California schools and community colleges are guaranteed a minimum funding level of at least 40 percent of California’s general fund under voter-approved Proposition 98.

Even so, a steep drop in tax revenue caused by the recession has eroded overall financial support for public education. State spending on K-12 schools dropped from $46.2 billion two years ago to $36.8 billion in the current fiscal year.

Education advocates are hoping higher taxes on the wealthy will provide additional stability to education funding, but bill opponents say it will do just the opposite.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said California already relies too heavily on its richest residents. That includes taxes on their capital gains from stock sales, which can fluctuate wildly year to year.

“An additional tax on the wealthy will only amplify the volatility we have had in our revenue streams,” Coupal said.

But Skinner said AB1130 returns fairness to the tax structure by using the rates that were in place under former governors Ronald Reagan and Pete Wilson. It ensures that families making $60,000 a year do not pay the same tax rates as those making $600,000 a year.

Skinner said she hopes to advance the bill from committee but said, “Achieving a two-thirds vote on the floor is a whole other question.”

Coupal suggested saving money by firing incompetent teachers and allowing private contracts for non-academic jobs, such as bus drivers, cafeteria workers and janitors.

Republican lawmakers have mentioned those suggestions in the past but rallied behind a different proposal Thursday. The Assembly GOP Caucus, with support from Senate Republicans, outlined a budget fix that included paying for education with the unexpected $2.5 billion the state has received in taxes since July.

Assemblywoman Linda Halderman, R-Fresno, called that idea a smarter alternative than further taxing the rich.

“Our greatest wage earners are leaving; they’re choosing other states,” she said.

Her party’s recommendations also would reduce some funding from health and early childhood development programs.

But the California Federation of Teachers says it is not enough to dedicate the additional tax revenue to schools while cutting other social service programs. The federation calls for more tax revenue to avoid deeper cuts throughout all of state government.

“To provide money for education and not take care of other needs of that child, that child won’t be ready to learn anyway,” Pechthalt said.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report)

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