In 2012, those of us who opposed Proposition 30 were told that the measure, which was the largest state tax hike in American history, was just a “temporary” fix to address the emergency of a severe budget shortfall. But just as Milton Friedman noted that “nothing is so permanent as a temporary government measure,” here in California it appears that nothing is so permanent as a temporary tax increase.
However, in their journey to extend the Prop 30 tax hikes, the tax raisers started tripping over their own greed. Even the public sector union bosses weren’t reading off the same page and different proposals began to emerge, each targeting billions of dollars of tax revenue to their respective constituencies. And compounding the problem was the fact that the “emergency,” which was the entire justification for Prop 30 in the first place, disappeared. California now has a budget surplus.
But greed being a powerful motivator, the special interests worked out a compromise that focused on extending only the income tax portion of Prop 30 and jettisoning the sales tax. This move was politically expedient given that only the income tax portion targeted “evil” rich people while the sales tax extension would have been an almost impossible sell. (If the version of the Prop 30 extension currently gathering signature passes, California’s highest in the nation tax rate of 13.3% would be extended until 2030).
In Sacramento, the normal political dichotomy is between those interests seeking to preserve what they have (i.e., businesses and taxpayers) and those interests seeking to take resources from, or impose regulations on, the former. For example, homeowners want to keep their tax dollars and thus are supportive of Proposition 13 while public sector labor interests and local governments want more of those dollars and thus loath Proposition 13 as it impedes their tax raising ability.
But the dichotomy sometimes breaks down because the line between private interests and public interests isn’t always clear. For example, California has both private and public hospitals with private institutions outnumbering the public by a factor of six. So one would think that the interests of hospitals would be more aligned with seeking lower taxes. But because hospitals get billions in public revenue for Medi-Cal, they have no problem seeking higher revenues for themselves at the expense of others.
And that is why the California Hospital Association has donated $12.5 million to the effort to extend California’s sky high income tax rate. Apparently, they remain unconcerned about the economic damage that comes from excessive taxes.
But the hospitals’ doubling down on the Prop 30 extension may not have been well thought out. That is because they want desperately to have voters approve another measure that has already qualified for the ballot in November. Originally intended for the 2014 ballot (but they missed the deadline) this proposal requires high procedural requirements (two-thirds vote of the Legislature and voter approval) before some of the existing Medi-Cal reimbursements to hospitals can be reduced.
So the question that voters must now ask themselves is why should we support the hospital industry in its effort to protect what it currently gets from government while it is also trying to force a $6-11 billion annual tax hike on Californians?
About the Author: Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.