Along with SB1253 -- the initiative reform measure the Think Long Committee successfully shepherded through the California legislature and which the Governor signed last month -- the second pillar of the Think Long blueprint for action was to establish a budget reserve to get the state through the revenue drought of hard times and manage the volatility that has afflicted the state’s finances for decades.
In the November 4th election, The Think Long Committee joined with Governor Brown in his campaign to successfully pass Proposition 2, "The Rainy Day Fund." We are happy to report that this ballot initiative passed with nearly 70% of the public voting in favor.
Under this measure the director of finance will estimate general fund revenues and expenditures for three years; the state will then deposit 1.5% of general fund revenues into the Rainy Day Fund until it reaches 10% of the state’s operating budget. Capital-gains revenue would be set aside automatically when it tops 8% of general fund revenue, and that money would go toward schools and community colleges during down years.
Prop. 2 captures one-time spikes in revenue to use for paying down the state’s wall of debt while creating a cushion to avoid budget cuts in an economic downturn.
With these two victories under our belt, the Think Long Committee will now turn its political action focus to the third pillar of our strategy, tax reform.
The essence of our plan is to lower income taxes across the board while maintaining California's progressive rate structure and levying a low tax on services to generate $15 billion a year for local government, higher education and infrastructure.
Services now account for nearly 70 per cent of California's $2 trillion economy, but are not taxed. If you buy a donut in a coffee shop you pay a sales tax; if you buy a legal, financial or entertainment service, there is no taxation.
As important as progressive taxation is, the key answer to reducing inequality is investing in the means of upward mobility -- job-creating infrastructure and higher education. To do that, California needs a steady and reliable stream of revenue. And for that, the Golden State needs a tax system for the 21st Century.
-- Nathan Gardels, Sr. Advisor, Berggruen InstituteNote: As the work has transitioned from developing solutions to advocating for change the work of the Think Long Committee now falls under a newly formed 501(c)(4).