Wednesday, January 28, 2009

Republicans considering the unthinkable: taxes

SACRAMENTO — Republicans are rethinking the unthinkable: saying yes, though begrudgingly so, to taxes.

It would be a hard break from dogma and would require their members to back down from pledges they've steadfastly upheld for years to avoid tax increases at all costs. But as state lawmakers stare into an abyss that is a $42 billion 18-month budget deficit, previous ideological markers appear to be softening.

But it won't simply be a matter of yielding to the realities of an economic crisis. Republicans are the minority party in both legislative chambers, but they hold huge sway over budget negotiations because a two-thirds vote is required on taxes and the budget. They are hoping to seize the opportunity in negotiations with Democrats.

Republicans are demanding that Democrats agree to a spending cap for future budgets, a proposal that has been a flash point in previous talks.

"We'll listen to anything Democrats will have if they're willing to do things that will fix the problem once and for all — a spending cap that's real," said Assembly Minority leader Mike Villines, R-Fresno. "Is there the will and courage to really change the way we do things? If we go back to real reform and structural changes, I think everybody will find a way to put this to bed."

Senate President Pro Tem Darrell Steinberg, D-Sacramento, Assembly Speaker Karen Bass, D-Los Angeles, and Gov. Arnold Schwarzenegger, back from inaugural events in AdvertisementWashington, D.C., will join Villines and Senate Minority leader David Cogdill, R-Fresno, in a Big 5 meeting today. Up against the possibility of running out of cash by early February, they're hoping to resolve negotiations by the end of the month.

Many Democrats argue that spending caps are inflexible and punitive and would force major cuts in areas such as education, but Steinberg said last week that "we have our eyes on the prize," a reference to the need for tax revenues. Bass said Wednesday that "all aspects" of the negotiations are being considered, though she carefully avoided discussing details.

A spending cap would allow some increase over the previous year's spending — about 5 percent, or the combination of population growth and inflation — and would divert extra revenues into a rainy-day fund to be used in years with slowed revenues or to pay off debt.

Such a change would require an amendment to the constitution and a vote of the people, likely in a special election, which complicates the negotiations a bit. Republicans want assurances that Democrats or their political allies wouldn't pour in millions of dollars to defeat a spending cap at the ballot after new taxes were imposed. They're asking that any taxes raised be contingent on passage of the spending cap. If it's defeated, all revenues raised would have to be returned, or revenues wouldn't be collected until a spending cap was approved by voters.

"There'd better be some good, solid reforms in place before anybody in our caucus looks at revenues," said Sen. Abel Maldonado, R-Santa Maria, who has cast deciding votes for previous budgets. "People who have signed (no-tax) pledges have to look within themselves and say, 'Do I want to keep a commitment to a pledge'"‰" or avert a fiscal disaster?

"It takes leadership," he added. "I voted for budgets against my caucus. If it's good for California, and for economic stability, I'll be an aye. If it's a budget that raises revenues with no long-term structural reforms, it's an easy no."

Assemblyman Chuck DeVore, R-Irvine, who is running for the Republican nomination to challenge U.S. Sen. Barbara Boxer next year, wondered if Republicans were walking into a trap that would leave them with unfulfilled promises and a tattered party banner.

"History has shown that permanent government reform, like spending limits, have proven to be temporary, and temporary taxes have proven to be permanent," DeVore said. "Republicans are ceding a core bit of their philosophy. We've already ceded the fight against big government. The tax issue, we've managed to hold the line on, but if you give up on that, I begin to wonder what the Republican Party stands for."

Taxpayer groups seem to be taking a less hard-line stance on taxes — as they eye future limits on spending.

"We will always oppose tax increases but would support the placing on the ballot of a spending cap," said Jon Coupal, president of the Howard Jarvis Taxpayer Association. "We'd have to look at the entire package to see if it was a good deal for taxpayers."

Sen. Mark DeSaulnier, D-Concord, said he welcomes a shift from Republicans on taxes.

"Given what's happened to them nationally and in this state, if they don't realize they need to change, they're not only driving the state over a cliff but their whole party, too," he said. "My hope is that the Republican Party will return to its roots, when they had people like Earl Warren who were about more than rigid ideology. That's one of the reasons I left the Republican Party."

Freshman Assemblywoman Nancy Skinner, D-Berkeley, called a possible Republican shift on taxes "very significant" but stopped short of crediting them.

"It has to be seen in context of the alternative, which is California running out of cash," she said. "So that diminishes a little bit whether you can consider it a watershed moment. Given the circumstances, it's an act of responsibility, not courage."

For Republicans, the courage is facing conservative constituencies that have had a history of punishing GOP lawmakers who voted for taxes.

"Of course there are political consequences," Villines said. "I don't think you'll see a single legislator that leaves this building that won't face political consequences. It's a tough budget."

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  • Republican leader: Democrats stalling on budget
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