The compromise tax hike initiative supported by Gov. Jerry Brown (D) would not raise enough revenue to eliminate California's $34 billion "wall of debt" in four years, according to a report from the state Department of Finance, the Sacramento Bee's "Capitol Alert" reports.
Details of Debt Wall
Last year, Brown introduced the wall of debt concept to encompass various forms of borrowing by the state over the past few years.
According to the Department of Finance report, the wall of debt currently is $34.2 billion and would drop to $8.9 billion by the end of fiscal year 2015-2016 if voters pass the compromise tax hike plan in November.
The projection falls short of Brown's goal to eliminate budget-based borrowing in four years with approval of the tax hike (Yamamura, "Capitol Alert," Sacramento Bee, 7/30).
Details of Compromise Tax Hike Plan
The compromise tax hike plan -- developed by Brown and supporters of the "Millionaires Tax" -- would:
- Increase the personal income tax by one percentage point for individuals who earn $250,000 annually or couples who earn $500,000 annually and by two percentage points for individuals who earn $300,000 annually or couples who earn $600,000 annually;
- Extend the income tax increases on wealthy residents from five to seven years; and
- Increase the sales tax by a quarter of a cent.
The sales tax hike would expire in four years.
The tax would raise an estimated $9 billion over the next fiscal year.
Last month, Brown signed the fiscal year 2012-2013 budget agreement, which includes revenue from the compromise tax hike plan (California Healthline, 7/30).