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Governor Brown is proposing a ballot measure that would take tax increases right to voters.

December 6, 2011 1:15 p.m.

GUESTS

Chris Cate, Vice President, San Diego County Taxpayers Association

Dr. Murtaza Baxamusa, Secretary-Treasurer, Board of Directors, Middle Class Taxpayers Association-San Diego

Related Story: Governor Wants To Take Raising Taxes Straight To Voters

Transcript:

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

CAVANAUGH: Governor Jerry Brown asks Californians to pay more for education and public safety. The USS midway museum hosts on a forum on how the mill stare going green. This is KPBS Midday Edition. I'm Maureen Cavanaugh. It's Tuesday, December 6th.

Our top story on Midday Edition, governor Jerry Brown released an open letter to the people of California yesterday asking voters to approve an initiative to raise taxes. The governor says the legislature has already made deep cuts in education and public safety, and now he proposes boosting revenues by increasing the sales tax and raising income taxes on the top 2% of Californians. Joining me to discuss the governor's direct approach to the voters are my guests. Murtaza Baxamusa is secretary treasurer of the middle class taxpayers' association of San Diego. Welcome pack to the show.

BAXAMUSA: Thank you for having me here, Maureen.

CAVANAUGH: And Chris Cate is vice president of the San Diego County taxpayers' association. Welcome, Chris.

CATE: Thank you for having me.

CAVANAUGH: And if listeners would like to get involved in the conversation, you can give us a call. The number is 1-888-895-5727. My first question is really to you both. Let me start with you, Murtaza. The governor says he's going straight to voters with this plan because he doesn't want to get bogged dawn in partisan gridlock. Do you think that's a good idea?

BAXAMUSA: I think this has been a significant step for the governor given that he has spent the last eight months trying to negotiate through the legislature, a majority veto that has held up his proposal. He had proposed over $10 billion in budget cuts. Those budget cuts passed and serially impacted our education and social services. However, the revenue component of his budget did not go through the legislature. So therefore given that he has reached this impasse, he's going directly to voters.

CAVANAUGH: Is this, Chris, a good idea? Should the governor finish to negotiate with the legislature and get some kind of tax package passed that way?

CATE: The taxpayers' association hasn't taken a position on the governor's proposal or any of the ballot measures out there circulating for signatures.

CAVANAUGH: Sure

CATE: I understand the rationale for doing such. I understand with the package process, and how convoluted it is to get things done in Sacramento -- so I understand his rationale for wanting to do this and go straight to voters. I think what it comes down to are the other competing measures that are out there, and the success rate that this'll have going up against four other ballot measures that are looking to increase taxes during the 2012 election cycle.

CAVANAUGH: The governor's plan includes a half% boost in sales tax Mrs. An income tax increase on California families earning more than $500,000. Is that a fair split, do you think, between taxes targeting high income people, and then everyone else?

BAXAMUSA: Once again let me also start out by saying the board of the middle class taxpayers' association has not taken a position on the specific governor's proposal. We're still evaluating this, especially in terms of fairness. But what is important here is to point out the need for revenues for the state, especially given the steep budget cuts we're also facing. And the targeting is a step in the right direction. I think this formula is essentially, like, the 2% on the 2% tax. And I think that Californians agree that a fair share of the taxes should be levied on those who benefit the most, which is the top 2% owners in California

CAVANAUGH: When you say targeting, you mean targeting upper income owners with a boost in income tax. What about the sales tax though? That's thought of I think usually by a lot of people as a regressive tax because it hits poor people as well as rich people.

BAXAMUSA: Any tax on consumption is regressive. It impacts a large segment of lower income earners. At the same time, studies by advanced AOCD, which is a government of advanced countries, shows that it's most effective in terms of generating revenues and is one of the most efficient levies. Really, the question comes down to are people that are being impacted already significantly by the recession having to pay up more, or is it really a tax that is taxing that wealth that is being generated from the economy?

CAVANAUGH: What about that, Chris? Is that division half of the tax or -- I can't say half the tax, half the proposal to increase revenue being placed on the burden of high income earners and then half of the proposal about the half% boost in sales tax. Is that a good division politically? Does it make sense financially?

CATE: I think looking at it overall, in general on its temporary, quote unquote, temporary bases. We've already done through that once with a temporary tax increase at the State of California. Look where that got us. Looking at competitiveness, where California lies with every other state, whether it's we're the third worst income taxed state in the country, we have the highest sales tax rate in the country. Looking at the regressive nature of the sales tax measure this, is one of the big reasons why we opposed Proposition D at a local level. What impact it would have on all individuals and their purchasing power, and the impact on their pocketbooks, whether or not they divided it for political reasons or whether or not he decided to split the two to garner votes, whatever his polling may have told him, looking at it in a competitive nature as a whole, and whether California ranks with the other states and what type of leaving the state will see -- in Maryland when they raised their tax on high income earners. So you have to look at it for the competitive nature of the State of California, as well as how it will impact the lower income families with the sales tax. And we know how regressive it is.

CAVANAUGH: One of the points the governor makes is that we need new taxes because education and public safety programs have been cut enough. Do you agree with that?

CATE: I think it's a matter of priortation. If education and public safety are a priority, what other programs at the state level are we looking at? One thing by cursory review of his initiate I have been, that we haven't seen, if there is a priority on education, what benefits or what safety mechanisms do we have as tax payerce when it comes to education spending that we're gonna see some performance metrics involved in there as well too? We request throw money at the problem all day long, but unless we have some type of guarantees or safety mechanisms that allow us to know what we're trying to get to, how we're going to get there, and if more money is needed, what guarantees do we have knowing that if we invest in this that we're going to see some type of outcomes that are going to boost California when it comes to education?

CAVANAUGH: Not just the dollar amount but something tied along to this that would actually measure how well schools are progressing with the extra revenue they receive

CATE: Right. Or what reform can we put into place that allow us to get there? If we can just throw money out this and not have the performance we need in the education field to reach those performance levels, we're just throwing good money after bad.

CAVANAUGH: A recent field poll found that Californians are noticing cuttings to education, and they are concerned about them. But they still don't want to pay higher taxes. Can the governor change that attitude? Can anyone?

BAXAMUSA: I want to say fundamentally, you get what you pay for. Most sited Supreme Court justice Oliver Holmes said the taxes are the price for civilized society. Now, as far as Chris's point, I think revenue is the key problem here because as California has grown, its income has not kept pace with the growth in population. We're now the 8th largest economy in the world. If California were a nation, it would be the 8th largest. However, spending on K-12 education has lagged behind. We're now 47th in the nation in terms of poor education spending. This is the bottom fourth in the nation. In terms of community college spending, we're at the bottom 6th. We now have the the highest teacher student ratio in the nation. This does not behoove California which needs to be cutting-edge in the entire world and is competing globally to not have enough investment in an educated work force. Our schools are suffering, our community colleges, our university, and our future education is suffering because of these kind of cuts. We're not left with fat. We're cut to the bone. We're now cutting an arm and a leg in our education system.

CAVANAUGH: What about the argument? And I want to ask you both, that taxes on anyone should not be raised during an economic downturn. Is that a valid argument as you see it?

BAXAMUSA: I think the most important issue here is look at the top 1% that have benefited over the last two decades. It used to be two decades ago, the top 1% made $775,000 average, adjusted for inflation, it has doubled before the downturn. The top 1% made 33 times that income of the middle class, the middle income. 33 times. And there is one reason for that. Executives, managers, financial professionals, they've benefitted significantly from the economic upswing. However, they did not pay their fair share. So what we see is, for example, giving the example of a CEO that made 35 times an average worker. Today, the CEO makes 275 times the average worker, yet their tax rate is still around 9%. That makes us a significant income inequality argument as well.

CAVANAUGH: Ream bring the question to you, Chris. The idea, the argument is made, that taxes should not be raised during an economic downturn. Do you think that's a valid argument?

CATE: Absolutely. And I beg to differ with Murtaza's contention that there is no fat left to be cut. Jerry Brown himself was -- two weeks ago, formed a proposal for pension reform. Where's the urgency to get that passed by voters? Where's the urgency to put that before voters and get signatures? You look at prop -- a couple weeks ago with the City of San Diego. As opposed to raising taxes, as opposed to raising fees, they looked 59 streamlining. How can we create one more job within the City of San Diego? The State of California should be doing the same. How can we create one more job for every single business in the State of California to have the income and the economy within the State of California grow? We're not looking at that. Instead, we're seeing 4, 5 different proposals now to increase taxes in some variation when businesses and individuals who are trying to increase their productivity and increase their own income or save their own jobs are looking how to expand their jobs, not trying to throw more money toward programs and what not that may or may not work.

CAVANAUGH: The governor is advocating raising income taxes on the top 2% of California earnaries. We've already a lot lately about the top 1% from occupancy Wall Street protestors. I'm wondering, do you think as a political savvy gentleman, do you think income disparity is an issue that's going to be moving voters in our coming elections?

CATE: I don't know about political savvy. But I think what voters are going to care about is how is it going to impact their own pocketbooks. I think voters are going to care about what affects them, and what is government doing to try to ease their own lives, to ease themselves? When you see a number of taxes -- and let's put this aside. When you talk about the business owners and what not, they don't pay taxes. Everything is passed along to 81 supers. I think everybody knows that. Nobody pays -- the top wealthy or the top business owners that don't pay taxes, they're going to pass along through prices to the consumer, and to the customers. That's going to impact everybody. When you have all these different taxes, they're going to impact down to the last person who's buying a candy bar off of a shelf. I think when voters understand that, and they recognize that, then they'll be more inclined not to support tax increases. Look at 2009, the special election. Same thing. The beginning of the great recession, they knew how it was going to impact their own pocketbooks, and they voted down prop one A.

CAVANAUGH: Now, Murtaza, student vs taken one of three libraries on campus closed because of budget cuts. You are a person who does a lot of thinking about how the middle class is being squeezed. And I wonder, what kind of an education system will be open to middle class families if need we keep making cuts?

BAXAMUSA: You point out a very important issue here. UCSD, a premiere education will institution, which has had Nobel Laureates, these are intellectual powerhouses that cannot be secondarized in terms of our education spending. This is investment that every major business, not just locally, but globally, looks at to see how and where they invest in. They invest in California because of our training work force, and because of our intellectual capacity in the universities that we have. And if we under fund that, that is our primary vehicle by which we sell ourselves competitively to a global world. We attract the best brains in the world because of what we have here. And if you're cutting corners there, I think that is really impeding our progress going forward. It starts with the libraries, spreads to the classrooms, soon we don't have a pathway for the middle class to enter into something that can be a lasting career in the future, globally. As well as we don't have the might, the powerhouses that attract businesses. Businesses don't cut corners in a marginal tax rate sense. They're really trying to build up their capacity for the future. They benefit, they harvest the yield that comes out of a university be it in terms of innovation, entrepreneurship, or inventions.

CAVANAUGH: I think we're going to have to leave it there. Buff I think that we're going to be talking about this a great deal, if and when this gets closer to the ballot, and voters actually have to make this decision. &%F0

Thank you both very much.

BAXAMUSA: Thank you, Maureen

CATE: Thank you for having me.