Acknowledging Gov. Brown's work on the budget since his election in 2010 - including going out to aggressively campaign for Proposition 30 - GOP Assemblywoman Connie Conway called Gov. Brown "the adult in the room."
Coming from a Republican, this is huge.
Indeed, despite what the critics and naysayers from the right said, Proposition 30 has provided Gov. Jerry Brown with the financial resources to project that California will reduce its annual budget deficit to zero by the end of 2013. Gov. Brown estimates that the state's $27.8 billion debt load will be reduced to $4.3 billion within four years.
To be sure, the final authority on the matter, the Legislative Analyst's Office (LAO), has yet to speak on the topic (the LAO saw less income from Proposition 30 than Jerry Brown during the campaign season). But the fact remains that California's budget picture is significantly improved because of the tax hikes imposed on California's richest citizens. Specifically, for the next seven years Proposition 30 imposes:
- A 10.3% tax rate on taxable income between $250,000 and $300,000 (formerly 9.3%).
- An 11.3% tax rate on taxable income between $300,000 and $500,000 (formerly 9.3%).
- A 12.3% tax rate on taxable income between $500,000 and $1,000,000 (formerly 9.3%).
- A 13.3% tax rate on taxable income over $1,000,000 (formerly 10.3%).
The new tax is important because the number of millionaires living in the state of California jumped from 25,000 in 1990 to over 100,000 today.
This translates into California having the highest proportion of people earning $1 million annually per capita. The new tax means that these new millionaires will have to pitch in more to help maintain the conditions that allow them to get fabulously rich in California.
As a side note, the new tax means - all things being equal - that we won't have to read as many contemptuous articles and cartoons like this one over the next seven years ...
As for the argument that the higher tax would drive millionaires out? It's an urban legend. Simply put, the data doesn't support the claim (here's a nice synopsis).
I'm sure we'll hear more on the topic in the coming months, especially from California's Legislative Analyst's Office. But one thing is clear. This certainly drills a hole in the GOP's "no new taxes" mantra at the national level. Big time.
UPDATE: Citing Governor Brown, Bloomberg is reporting that we may end fiscal year 2013 with an $851 million surplus.
UPDATE II: Paul Krugman chimes in here.