Recent History Shows California Tax Rebates A Bad Idea
Posted Mar. 1, 2014, 8:54 am
Tom Elias / Mirror Columnist
If there’s a state budget surplus, let’s return it to the people we took it from, goes the demand these days from conservative Republicans led by Assemblyman Tim Donnelly, who now represents a lot of barren desert and would like to be governor of California.
It’s quite a siren song and one we’ve heard before, most recently 14 years ago. Who wouldn’t like to open the mail and find a fat check from the state?
But it’s a bad idea. Just ask Gray Davis, the former governor ousted in a 2003 recall election and replaced by muscleman actor Arnold Schwarzenegger.
Davis acquiesced in 2000, when legislative Republicans voiced precisely the same arguments made by Donnelly today. A case can be made that there was a straight line from the rebates he ordered then to the recall. The refunds ranged up to $150 for 12.3 million Californians who filed tax returns in 1999 ($300 for couples filing jointly).
Those checks weren’t the only way Davis returned money to taxpayers. He also cut the vehicle license fee (aka: the car tax) and exempted 275,000 public school teachers from having to pay any state tax on their teaching income. He increased the research and development credit for corporations from 12 percent to 15 percent. He doubled property tax assistance for the disabled and those over 62 and he gave $600 a month each to senior citizens in rent relief.
Then came the dot-com bust, and suddenly – because Davis had passed back all that cash – he couldn’t prevent wholesale budget cuts to schools, highways, state parks and other vital programs.
The first thing he tried was to reinstate the old levels of car tax. That produced huge recall-season rallies in car dealer lots, most featuring Schwarzenegger and others claiming Davis was unilaterally raising the levy. In fact, he was and he wasn’t, depending on how you looked at it. But he needed the $3.9 billion he had earlier cut from the car tax in order to spare many other programs.
Obviously, there’s a lesson here for Brown, one that he has heeded. Brown so far has completely ignored the calls of Donnelly (one of just two Republicans so far entered as candidates to replace Brown in this year’s election).
Instead, his budget proposal includes $1.6 billion for the opposite of rebates – a rainy day fund designed to prevent shocks like those of the Davis era if capital gain taxes – a major part of the state’s income tax take – suddenly plummet as they did in 2001-2002. Brown, who once employed Davis as his chief of staff, has certainly learned from his onetime protégé’s politically fatal mistake.
This may infuriate Donnelly and conservative Republicans whose ideological forebears had no problem with deep cuts in social services like care for the frail elderly and preschool education, not to mention public schools and universities, carried out under Davis, Schwarzenegger and Brown.
Instead of giving tax rebates, Donnelly griped, Brown is “giving pay increases to union members while leaving regular, hardworking taxpayers out to dry.” In short, Donnelly indicates he doesn’t believe unionists are taxpayers or that parents of schoolchildren pay taxes. Huh?
He sounds a lot like current Congressman, then state Sen. Tom McClintock did back in 2001, when he exhorted Davis to “return the state’s surplus as a rebate to help families cope with high prices. The governor’s spokesman said this relief ‘won’t see the light of day.’ We beg the governor (Davis) to reconsider.”
Davis did, and ended up the only California governor ever kicked out before his term ended, also becoming the butt of endless jokes. Wisecracked late-night television host Jay Leno, “An NBC News poll has found that if the election were held today, 31 percent of Californians would vote for Schwarzenegger and 26 percent were not sure. Today Gray Davis changed his name to ‘Not Sure.’”
Brown has been the butt of plenty of jokes in his career and doesn’t want any more of that. So you can safely bet there will be no tax rebates, no givebacks, no response comparable to Davis’ to the current demands of Donnelly and friends.