Brown to Put Tax Hike Plan on the Ballot

SAN FRANCISCO — California Gov. Jerry Brown unveiled a ballot initiative this week to temporarily raise the top income tax rate on individuals to as much as 12.3% — making it the highest in the country — as part of an effort to raise nearly $7 billion annually.

The governor’s tax plan to help fund education and public safety would also ask voters in November to approve a half-cent increase in the statewide sales tax, which would bump it to 7.75%.

“My proposal is straightforward and fair,” Brown said in an announcement Monday he called “An Open Letter to the People of California.”

“It proposes a temporary tax increase on the wealthy, a modest and temporary increase in the sales tax, and guarantees that the new revenues be spent only on education,” Brown said.

Brown’s plan would raise taxes for five years in three tiers from 1% to 2% for earners making more than $250,000, with a top rate of 11.3% for those who earn more than $500,000.

California now has a maximum tax rate on individuals of 9.3%, plus a 1% surcharge on those making more than $1 million to help fund mental health services.

After the increase, the state sales tax would also be among the highest in the country. Many local governments levy additional sales taxes.

Oregon and Hawaii have the highest individual tax rates at 11%. Oregon has no sales tax, while Hawaii has a general excise tax on businesses instead of a sales tax.

“There’s a lot of uncertainty around the political prospects of a vote for taxes, especially as the various proposals proliferate,” said Standard & Poor’s analyst Gabriel Petek. “The state made significant spending reductions for fiscal 2012, however, and so a revenue component to solving its anticipated fiscal gap in fiscal 2013 has some understandable practical and policy-related appeal.”

Last month, the state’s bipartisan Legislative Analyst’s Office estimated the state would have a deficit of almost $13 billion next fiscal year.

The current budget was balanced assuming rosy revenue projections that have failed to pan out, as well as an almost $2 billion take from local redevelopment agencies that is tied up in the courts.

Education is expected to take the brunt of mid-year budget cuts built into the budget as a safety valve to be triggered if revenues fall short.

The governor’s tax initiative joins a crowd of potential tax measures aiming for the November 2012 ballot.

Molly Munger, a wealthy civil rights advocate, has also filed a proposed ballot initiative to raise income taxes to help fund public schools and preschools.

The California Federation of Teachers is leading an initiative drive to also raise taxes to benefit schools.

In addition, a group of billionaires and political insiders called the Think Long Committee plans to put two initiatives on the ballot to try to reform the state’s tax system while raising more revenue.

Not all are pleased at the prospect of higher taxes.

“Voters rejected similar tax increases in the past and have shown strong reluctance in the polls to accepting high taxes to bail out Sacramento,” said Assembly Leader Connie Conway, R-Tulare, in a statement. A coalition of taxpayer groups was reportedly expected to file a plan Tuesday for an initiative to limit state spending.

Brown wrangled with Republican lawmakers during budget negotiations this year over a spending limit in exchange for extending temporary tax increases.

Talks failed, and the governor and lawmakers had to maneuver to deal with the budget hole created when those taxes expired.

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