Gov. Jerry Brown is putting one of his top budget priorities front and center, by calling for a special legislative session focusing on rewriting California’s rainy day fund laws.
Brown wants to lessen the impact of future budget deficits by forcing the state to sock away extra tax revenue. His proposal focuses on the most volatile area of revenue: capital gains taxes.
Brown’s finance director, Michael Cohen, said the governor is calling the special session because he’d like to see debate on the proposal wrap up before mid-May, when lawmakers focus on passing the budget. But putting a constitutional amendment on the ballot requires a two-thirds vote, so this is one of those rare times where Republican legislators will have real leverage in Sacramento.
And Republican leaders are making it clear that, while they like the idea of saving more money, they still have a lot of questions about Brown’s plan.
“We want a strong ‘locked box’ that protects taxpayers’ monies instead of a ‘piggy bank’ that can be raided on the whim of the majority party’s desire to spend,” said Senate Minority Leader Bob Huff, pointing out Brown’s plan would require only a simple majority to spend the stored-up fund money.
In February, we took a detailed look at Brown’s proposal — and how capital gains taxes can hijack California budgets:
Capital gains tax revenue dropped by $7 billion during the last recession – that’s more than what this year’s budget would spend on all human services programs.
How does one area of revenue play such a big role in California’s budget health? It’s really a problem caused by the top 1 percent of the income tax bracket. “The personal income tax makes up about two-thirds of the state’s general fund,” said Sisney. “And the fraction of the personal income tax that’s paid by the 1 percent of returns with the most income has often been around 40 percent, or even more.”