09 January 2011

Governor Brown of Calif.: Seize this opportunity

I think Governor Jerry Brown has a real, if risky, political opportunity right now. First, a few background facts. As mentioned below in another connection, a recent CBS 60 minutes poll showed that a substantial majority of the US population, if asked about methods of reducing government debt, say that taxes on the very wealthy should be increased (only a tiny percentage, 3% say cut Social Security). California is in dire financial straits by any measure. Certainly, especially in view of the fact that States cannot run year after year deficits the way the Federal Government can, its financial health is worse than the debt situation of the Federal Government as a whole.

Governor Brown has shown some very real initiative and seriousness about changing the power centralization balance (State v. Local Govts.) and minority faction ability to deadlock fiscal policy aspects of California's tax and budget system, which are largely the legacy of the disastrous prop. 13 passed way back when Brown was first governor, in 1978. But I think he has a terrific opportunity to take the gubernatorial bully pulpit and urge Californians to enact a new tax code, radically different from the Federal system on which California's -- and most states' -- are currently closely modeled. California should be the first in the nation to depart sharply from low taxes for very high income individuals, low taxes on capital gains, and tax breaks for derivatives traders, etc.

Brown should develop, unveil, and then sell, sell, sell a tax reform that is modeled on Robert Reich's ideas in his book Aftershock. Keep marginal state income tax rates about the same for middle class Californians, and lower or even eliminate them for lowest income levels. But raise the capital gains tax to more than the marginal rates for other income, and impose new, much higher tax rates for those earning over $250,000/year, with those earning many millions paying very substantially more. Voters would have to approve this, but since it wouldn't raise most peoples' taxes significantly, I think they could be persuaded to do it.

Another thing Governor Brown could do is to propose, develop, unveil, and sell a California Recovery Bond program, to issue state bonds for sale to private individuals. I think there is both a market and a civic impulse out there to help the State (and the Federal Government) fund a recovery, by investing in simple bonds like savings bonds that pay better than market interest (which is practically nothing), and which would help the state raise desperately needed operating funds.

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