Will Republicans lose state budget battle?

February 28, 2011

As the budget debate continues in Sacramento, some political analysts are continuing to question the current Republican strategy of blocking proposed tax hikes, while not offering fiscal solutions of their own. [LA Times]

Recently, 30 of the 42 Republican state legislators joined a new Taxpayers Caucus, signing a “no tax” pledge circulated by Grover Norquist of Washington, D.C., founder of Americans for Tax Reform.

Caucus members further pledged to oppose Gov. Jerry Brown’s effort to allow voters to decide whether temporary tax hikes should be extended for five years.

However, Times columnist George Skelton points out that conservative icon and former California governor Ronald Reagan raised state taxes by a record amount in 1967. Reagan told the legislature that most voters supported him “because they see the need to balance the budget.”

And in 1991, Republican governor Pete Wilson privately warned his colleagues that “they would become irrelevant” if they didn’t pass a tax increase. They eventually listened to their governor and taxes were increased.

Some Republicans have based their opposition to taxes over fears that businesses will flee the state.

In fact, businesses are neither significantly fleeing the state — for any reason — nor moving in, according to a study by the Public Policy Institute of California.

“Business relocation — the movement of business establishments from one state to another — accounts for a very small share of California’s unemployment fluctuations,” institute analyst Jed Kolko wrote in September. “In fact, relocation accounts for a smaller share of job gains and losses in California than in most states.”

Kolko studied data from 1992 through 2006 and found that “only 1.7% of all job losses were due to establishments leaving the state.”

Meanwhile, the Los Angeles Chamber of Commerce on Friday endorsed Brown’s plan to solve California’s chronic budget deficit — currently around $26 billion — with half spending cuts, half taxes.

Brown hopes to have his budget proposals passed by mid-March.