After losses in Wisconsin, San Diego and San Jose, the next big test on the horizon for public sector unions is the tax increase on the ballot in California this fall. (As usual with such measures, it is being sold as a"millionaire's tax" that happens to hit individuals making more than $250k). Governor Brown and the unions know that the voters must pass this measure to address the state's $16 billion budget deficit. Otherwise, the Governor has threatened to take an axe to state spending.
Recurrent fiscal crises and poor economic performance have recently characterized California. In response, Brown has favored accounting tricks, tax increases, and a modest pension reform to stave off a reckoning with the Golden State's dysfunctional political system.
The tax measure is essential to preserving the status quo--especially when it comes to the pay and pensions of public employees. The measure is still ahead in the polls but public opinion may be shifting.
The status quo to be preserved includes some of the more generous public sector pensions in the country, a lousy business environment, and a tax system that is highly unstable. Indeed, by relying so heavily on income tax on high earners and capital gains taxes, state revenue has been remarkably unstable. Income taxes, mainly on the richest Californians, have grown from 10% of total revenues in 1950 to more than 50% today. However, public employee unions, especially the powerful state teachers union, must defend their members interests in current arrangements.
If the tax measure fails, "trigger cuts" would have negative effects on schools, universities, and welfare recipients. Such a crisis might force the emergence of a pro-growth and fiscally prudent political coalition in California.
The tax measure is essential to preserving the status quo--especially when it comes to the pay and pensions of public employees. The measure is still ahead in the polls but public opinion may be shifting.
The status quo to be preserved includes some of the more generous public sector pensions in the country, a lousy business environment, and a tax system that is highly unstable. Indeed, by relying so heavily on income tax on high earners and capital gains taxes, state revenue has been remarkably unstable. Income taxes, mainly on the richest Californians, have grown from 10% of total revenues in 1950 to more than 50% today. However, public employee unions, especially the powerful state teachers union, must defend their members interests in current arrangements.
If the tax measure fails, "trigger cuts" would have negative effects on schools, universities, and welfare recipients. Such a crisis might force the emergence of a pro-growth and fiscally prudent political coalition in California.
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