California's dueling tax hikes: 'Nightmare' ahead?

A potentially serious complication has arisen in California's latest effort to avoid billions in spending cuts, which threaten the state’s education and welfare systems.

Gov. Jerry Brown's Proposition 30 intends to forestall "draconian" budget cuts by temporarily raising taxes, including sales taxes and income taxes on the wealthy. The initiative could largely determine his legacy, as well as the state’s fiscal health for at least a decade. Moreover, if successful, Prop. 30 could begin to shift the national conversation on taxes after decades of extreme antitax sentiment across the country.

Polls show that a thin majority of state voters support Prop. 30. But that support could be undercut by another proposition that aims to raise taxes for public education. Molly Munger, the millionaire behind the rival initiative, has even suggested she might start airing comparison ads arguing why voters should vote for her proposition, not Governor Brown's Prop. 30.

The mere presence of Ms. Munger's Proposition 38 could cause confusion among some voters, experts say. It could also draw some votes away from Prop. 30. And if both initiatives pass, only the one with more votes would be implemented.

At this point, Prop. 38 has only 34 percent support, according to a recent USC Dornsife/Los Angeles Times poll. But every vote could be precious for Prop. 30. And if Munger turns to "attack" ads, Prop. 30's passage could be in doubt. 

The Yes on 30 Coalition – which includes top members of the California Teachers Association, the state Board of Education, and the state Senate – sent a letter Monday to Munger calling on her to avoid negative attacks.

“Any actions to destroy Prop. 30 – the one measure which would prevent $6 billion in cuts to schools and colleges and universities this year and which has a viable path to passage – fly in the face of state goals to improve educational opportunities for our children,” says the letter.

Munger, who is the daughter of Charles Munger, a billionaire investor with Warren Buffet’s Berkshire Hathaway Corporation, has already spent $30 million of her own money. She says that Brown has exaggerated how much Prop. 30 would help education. "If you're going to say that you're something you're not, we do have to say, 'Well, actually, that's not the case,' "  Munger told a local NBC affiliate on Sunday.

Brown’s plan would produce about $8.5 billion the first year and nearly $6.5 billion annually thereafter for state budgets by creating new income brackets for the state’s highest earners for seven years and upping the sales tax a quarter-cent. Munger's plan would provide close to $10 billion annually only for schools by increasing personal income taxes for a dozen years on all Californians, from less than 0.5 percentage points for the lowest earners to 2.2 percentage points for those making more than $2.5 million.

Undeterred by the letter, Munger spokesman Nathan Ballard said in a statement: "We really appreciate the campaign advice contained in the letter. However, we believe that voters are smart enough to make up their own minds between Prop. 30 and Prop. 38, and we will not shy away from making a comparison between the two measures because we believe Prop. 38 is far better for our schools than any other measure on the ballot."

Analysts say this 11th hour dogfight could sink both measures.

“If the Prop. 38 campaign attacks Prop. 30... expect the Prop. 30 campaign to counter,” says Michael Shires, professor of public policy at Pepperdine University. “At that point, you could have two well-funded initiatives fighting it out, with the likely consequence they will both lose.”

Some analysts say the votes may come down to how personal wealth and ambition end up playing into decisions.

“This campaign is tight, and the Munger initiative is trending away from approval, but one open question is: Does that campaign take Prop. 30 down with it?” asks David McCuan, a political scientist at Sonoma State University. “Is Munger more important to the future of education in California than Governor Brown?”

Some analysts say it may be too late in the season to affect a change, because most advertising spots are already taken.

“The only ray of hope for Prop. 30 is that most of the ad buys are already done,” says Barbara O’Connor, director emeritus of the Institute for Study of Politics and Media at California State University, Sacramento, who says "governing California will be a nightmare” if Prop. 30 fails.

“Voters are very close to the point where more and more negative ads are just not going to have an impact," she adds. "They’re too saturated.”