Brown‘s tax plan faces hazard

By Dan Walters

During a stream-of-consciousness speech to a gathering of police chiefs last week, Jerry Brown noted that during his first term as California's governor, beginning in 1975, personal income taxes generated about a third of the state's revenue. Since then, they've become a dominant source.

The result, he continued, was "more volatility" in the state's revenue, which resulted in "a more or less constant state" of deficits.

That's absolutely correct.

When income taxes spike upward, politicians and voters squander windfalls on difficult-to-lower spending, and when they plummet ― as they always eventually do ― the state is then left with multibillion-dollar gaps.

Brown told the top cops that he's trying to "deleverage" by bringing state income and outgo into closer balance, citing the meltdown in Greece as an example of what happens when the two sides of the fiscal equation cleave apart.

A worthy goal.

Why, then, would Brown embrace a fiscal plan that would make the state's revenue even more volatile by making them even more dependent on how well a handful of high-income Californians are doing in stocks and other speculative investments, while locking additional billions of dollars of spending into the state constitution?

The answer: political expediency.

Brown had touted "a balanced proposal" of temporary increases in sales and income taxes, coupled with some major spending reductions, but it was not polling well and faced competition from two other measures.

Two days after talking to the cops, he merged his campaign with one of his left-wing rivals', reducing the sales tax portion and sharply boosting taxes on a few hundred thousand high-income Californians that his new partners mock as "the 1 percent."

Brown's earlier plan would have increased income taxes to an estimated 62 percent of revenue.

His new one would push it past two-thirds, mostly coming from the upper-income taxpayers ― assuming they don't flee to no-income-tax states or shelter capital gains from the nation's highest tax rates.

It also would engrave into the constitution about $6 billion in payments to local governments for his "realignment" program.

Democratic legislators are already planning how to spend the extra $2 billion that the revised scheme would supposedly generate for the 2012-13 fiscal year.

A soak-the-rich approach does have populist appeal, but it would make revenue even more volatile, and the spending splurges even more difficult to restrain. Thus, it raises the likelihood that the state would face even wider budget deficits in future years.

Brown desperately wants to say he's solved the state's fiscal problems, but if his new plan wins, he'll likely just have bequeathed more grief on his successors.

He knows better, or should.

Dan Walters is a columnist for Sacramento Bee. Reach him at dwalters@sacbee.com. For back columns, visit www.sacbee.com/walters.