Showdown imminent over state taxes

To tax or not to tax is, once again, the key question to balancing California's chronically deficit-ridden budget - and possibly the political future of state lawmakers facing an election next year.

A linchpin of Gov. Jerry Brown's revised budget, which aims to close a $9.6 billion deficit, is legislative agreement - almost immediately - to extend three tax rates set to expire July 1.

A public vote on the tax extensions worth $8 billion a year would come later, either this fall or more likely in 2012, according to state Sen. Mark Leno, D-San Francisco, the Senate Budget Committee chairman whose district includes southern Sonoma County.

But Republican lawmakers, who hold four of the votes needed to extend the taxes, appear dug in against anything that resembles a tax increase.

"They haven't yet given an inch," Assemblyman Michael Allen, D-Santa Rosa, said.

Allen, an Assembly Budget Committee member, said it "makes sense" to keep the current taxes in place. "You have the budget resolved for the (fiscal) year," he said "People have some certainty."

In his news conference Monday, Brown warned of an "$8 billion hole" to be filled if the tax extensions are rejected.

If the current tax rates are allowed to expire, the statewide sales tax would drop by 1 percent, annual vehicle license fees would be cut nearly in half and state income tax bills would drop for those claiming dependents.

"We'll go to plan B, C and D," Brown said, declining to elaborate on the what would be done to implement an all-cuts budget favored by Republicans.

"I'm not going to give the Republicans a roadmap to ruin," Brown quipped, when reporters pressed for specifics.

His revised budget, however, suggested that the cuts could include a $5 billion takeaway from the public schools, the equivalent of eliminating four weeks of the school year and 52,000 community college courses, or laying off 51,000 teachers, raising K-12 class sizes to 30 and boosting community college fees from $36 to $125 per unit.

An all-cuts budget also could slash $1 billion in funding from the University of California and California State University systems.

Assemblyman Jim Nielsen, R-Gerber, was unmoved.

"Raising taxes only guarantees increased spending," said Nielsen, the Assembly Budget Committee vice chairman who once represented Sonoma County in the state Senate.

The $6.6 billion surge in state tax revenue, also announced by Brown on Monday, is "further proof that we don't need to impose billions in higher taxes on already overburdened taxpayers to balance the budget," Nielsen said.

Over five years, the proposed tax extensions would amount to more $50 billion, Nielsen said.

The Legislature in 2009 approved two-year sales tax, vehicle fee and income tax increases in a budget deficit reduction deal hammered out by former Gov. Arnold Schwarzenegger and state lawmakers. Those tax hikes - the biggest in California since 1991 - will disappear this year without legislative or voter action.

With tax increases regarded by Republicans as "politically toxic," the governor's chances of finding two GOP votes in both the Assembly and Senate are slim, said Jack Pitney, a professor of government at Claremont McKenna College and former Republican Party policy analyst. "

The governor had said he was talking to "more than four and less than 10" Republicans about voting for the tax extensions.

"I've got to remain hopeful," Leno said, regarding the prospect of corralling the Republicans needed for a two-thirds vote on taxes.

Holding onto their anti-tax principles might backfire on some Republicans when moderate voters, repelled by heavy cuts to public school budgets, vote against them next year, said David McCuan, a Sonoma State University political scientist.

Pitney discounted that possibility, saying that voters, "justly or unjustly," tend to "blame the governor" for budget consequences.

Brown said Monday that Proposition 25, which docks lawmakers' pay if they miss the June 15 budget deadline, might give him some leverage.

But Pitney suggested that a vote for taxes could do a Republican more permanent harm. "The prospect of political oblivion speaks larger than the loss of a couple of weeks pay," he said.