Can California Democrats Capitalize on a Legislative Supermajority?

November 6 was an historic day by any account. One of the more interesting results, from a state tax perspective, is the supermajority that was achieved in the California Legislature. In a somewhat unexpected result, Democrats picked up a supermajority in both houses of the state legislature. Obtaining a supermajority in both houses has not occurred in California since 1933, when Republicans were in control of both houses. But while this presents Democrats in California with an historic opportunity, will they capitalize on it or squander it?

California is, for lack of a better word, broken. Decades of gridlock and ill-advised constitutional requirements imposed by voters have left the state all but dead in the water. California is a test case in what happens when neither party will budge. Many of the contemporary fiscal problems in the state began with the passage of Proposition 13, which fixed the property tax rate at one percent of a property?s assessed value. Since that time, the state, which boasts the 9^th largest economy in the world, has had to deal with skyrocketing debt and a plummeting credit rating.

Still, Democrats and Republicans have been unable to agree on a solution. Republicans have held strong to "no tax pledges" and Democrats have used gimmicks to make it appear they were cutting taxes, when they weren't cutting taxes at all. Now, however, Democrats have been handed power that is often dreamt of by politicians. Democrats can bypass legislative rules and override vetoes by the governor (though with a supermajority in both houses, it is unlikely the governor would bother to try a veto).

But perhaps the most important power Democrats will have in the next year is to put constitutional reform measures before voters. In order to lead the state out of the hole it is in, Democrats must rise to the challenge of major constitutional reform. In fact, it may be time for a constitutional convention and repeal of the state's current constitution. California's constitution is over 30,000 pages long. It is exceedingly complex. It is unworkable.

Taxpayers in California are ready for change and they said as much at the ballot. This past November, voters passed Proposition 30, which increased income taxes on earnings over $250,000 for seven years and increased sales taxes by a quarter percent for four years. The revenue increase from the initiative will be used to fund schools. Passage of any tax increase is a decided step away from Proposition 13.

With all that in mind, here is a bit of advice for both parties. Republicans: although you lost legislative seats on November 6, hope is not entirely lost for the party. Given that many changes in the state require voter approval, the party should focus on selling a conservative message to the people. The Republican message cannot simply be "no tax increases" because there is no hiding from the fact that the state needs revenue. Instead, Republicans must go back to their conservative roots and promote limited government and personal responsibility. It may sound simplistic, but Republicans in California need to review the basics of being conservative -- and being conservative does not equate to no tax pledges, or at least it shouldn't. Once they remember their basic principals, then perhaps they can sell the message.

Democrats: take a deep breath and think before you act. This is an opportunity that may not present itself again any time soon. If ever the party wanted to advance its goals, this is the time. But while Republicans cannot block your efforts, there will be no blaming Republicans if your policies fail to revive the state. If the state fails now, Democrats in the state may be left holding the smoking gun.

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Source: http://www.tax.com/taxcom/taxblog.nsf/Permalink/CGRH-92F27Y?OpenDocument

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