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California Gov. Brown talks taxes, cuts and economic fairness

Like other states across the U.S., California's grappling with a giant budget hole. Gov. Jerry Brown talks about the role of government and the tension between taxing the rich and cutting programs for the poor.

Kai Ryssdal: There's the American Dream -- we've all heard of that -- and then there's California Dreaming: Hollywood, Silicon Valley, beaches and plenty of sunshine. Also, Sacramento, the capital. That's where Gov. Jerry Brown announced last week that the budget gap out here is a little more than he had originally guessed.

OK, it'sa lot more. It's almost double to just shy of $16 billion. The governor's got a plan, though: spending cuts, and he wants to raise taxes -- a higher sales tax and surcharge on the wealthy. Voters get to decide; it's going to be a referendum in November -- raising taxes on the rich to avoid drastic cuts in services to the poor.

As part of our continuing coverage of Wealth and Poverty on this broadcast, Gov. Jerry Brown joins us now. Welcome to the program.

Jerry Brown: Good to be here.

Ryssdal: Seems to me what we have here, sir, in this budget question is the defining issue of our political times, right? The question of what government does -- social services, education -- versus our willingness to pay for it. Where do you find the fulcrum -- what's the balance point?

Brown: Well the balance point is the budget itself, and my willingness to either stand for balance or to fold like governors before me. Since I've been here before -- I was governor from 1975 to January of 1983 -- I want to fix it. And it may take us a year or two, but we're going to get to the goal of living within our means.

Ryssdal: Why is it that this debate, Governor, happens on the far ends of the economic spectrum? We're talking about cutting services for the most needy in our society and taxing the very richest. How do you reconcile that with an electorate that lives mostly in the middle?

Brown: Well, the electorate in the middle is telling every survey that they don't want any more taxes. They are willing to see the taxes on the most affluent increase at least temporarily -- if it's for schools, for public safety and for the most vulnerable. So faced with a gap of $15.7 billion, I can either fold my tent and then just slash away, or I can give the voters an opportunity to say, 'OK, we'd like to shoulder part of that burden.'

Ryssdal: What happens, Governor, if Californians opine against these taxes? Are you ready to let the cuts happen and then see how ready and willing people are actually to pay for what they get?

Brown: The cuts will be built in to this year's budget very soon.

Ryssdal: But Governor, having them built in and letting them actually happen are two totally different things. Are you ready to actually let it happen?

Brown: Wait, I beg to differ with you. These will be automatic; that's why they're called trigger cuts. A no-vote pulls the trigger and we cannot finance our budget without borrowing. We cannot borrow unless our budget is truly balanced. It cannot be balanced without having automatic reduction in spending after the election, if the voters so decide.

Ryssdal: And then what happens? Do you think, once these cuts go into effect -- assuming Californians decide not to maintain the taxes -- do you think people will finally realize the connection between services and getting what you pay for?

Brown: I think people know that you can't get something unless you pay for it. So there's no doubt that as this population ages, as the world gets more competitive, we're going to have to invest through the public sector more, not less. But now when people to agree to that, I can't tell you. And if people don't, there will be a shrinkage over the next many years and decades.

Ryssdal: How is it, do you suppose Governor, that the issue of income inequality, of big government versus taxing the rich versus wealth and poverty and all of those dynamics in this economy today -- how did it all get so political? How did we get here?

Brown: I don't know how much history you know.

Ryssdal: A decent amount.

Brown: Take a look at the 1800 election between Adams and Jefferson -- a lot of nastiness there. Look at some of the campaigns, what they said about Abraham Lincoln. Part of democracy is a measure of skullduggery and shaming and blaming. But somehow, we've made it. And we'll continue if we find a few people of courage and clarity that can mobilize the better spirits of our people.

Ryssdal: Well let me continue with that theme then quickly, if I might: Isn't the essence of a representative democracy that we the citizens cede some of our power to you, our representatives, and you guys make the hard choices, right? How are you doing so far on that one?

Brown: Well I think we ought to make it our choices. Does it fit with what I was brought up as a good Catholic to think is right? No. This is not in accordance with what Jesus or Muhammad or any other prophet would have recommended. But here's the world we live in, and we're trying to make it the best way we can. I'm optimistic that California is going to set the example. California's created more patents, we've got more venture capital, we have more Fortune 500 companies. We're on a path of recovery, and we're on a path -- I believe -- to resolve some of these deeper contradictions that in Washington, they appear to be increasingly paralyzed by.

Ryssdal: Jerry Brown, he's the governor of the state of California. Thanks a lot for your time, sir.

Brown: My pleasure.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
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?Without massive public sector cuts the private sector in California will never return.
Brown has failed time after time to live in reality. We have a horrible spending problem in California which he refuses to address.. Brown with his failure to reign in governments out of control spending displays his complete failure to govern California. This man is such a complete fool that he can only raise taxes and find more ways to waste the peoples money.
Without massive public sector cuts the private sector in California will never return.

12 hours later and I am still mad at you Kai. Shame on you for not having the journalistic strength to ask the Governor the hard questions. What about pension reform? Some of the benefits California had, they are slowly changing, but mirror Greece's government, where employees retired very early, with very lucrative pensions for life. What about his statement that they have cut, yet his budget is 6% more than 2010. Kai, have you had a 6% raise since 2010? We the people need the truth, and our leaders need to know we are aware of their lack of performance. He said they are trying. If I performed at my job in medicine, the way the legislature has performed balancing the budget, reform government and college administrative costs, the lack of, I would have been fired!
I am so saddened that you had the opportunity to really find out some answers, and instead were star struck and basked in the glow of non-performance.

Mr. Kai couldn't ask more meaningful questions?

You said "pay for services": Are you saying California is a less taxed state? CA comes in top 5 in both income tax rate and sales tax rate. Where is all this money going? Why didn't you ask this question? You think CA residents are taxed less?

Why didn't bring up pension cost. Governer is not doing anything to reduce pension costs. He could have put a proposition "to reduce pension costs. If it fails trigger cuts". I am sure it will pass with 3/4th majority. Why didn't he put that proposal.

CA is totally run by Unions. Productive population is totally screwed. Only 1% in CA are govt employees with their good pensions and lifetime benefits.

I have a non-political observation to make. In another part of this interview not shown here, Governor Brown identified that he could see 50 miles out into the Pacific from his home in Oakland. The guy may be able to do the vision thing better than most people, but he can't do that. There's a thing called the horizon. According to my mathematician son (a recent graduate of a California state university), the formula for deriving the distance is by multiplying the height of the view, in feet, by 1.5 and taking its square root (don't ask me, I went to CUNY and OSU before they even had slide-rules). His house would have to be 1600 feet above his own height above sea level to see 50 miles. Fortunately, there are some things in the universe that are exempt from California's voter initiatives.

There are many houses in the Oakland hills at 1600' or higher.

Here's an interesting fun fact. Who is bankrolling Governor Brown's tax hike initiative?

CHART: The Big Government and Union Special Interests Bankrolling Governor Brown's Tax Hike
http://www.twitpic.com/9gi4e1/full

Strange how these same names also prominently appear on the list of California's biggest political spenders.

CHART: The 15 Biggest Spenders in California Politics
http://www.twitpic.com/75tc0v/full

Please allow me to compare California's current tax policy and Governor Brown's proposed tax increases against the policies of the other 49 states.

CHART: California Income Tax Brackets and Governor Brown's Tax Hike Proposal Compared to the HIGHEST Marginal Tax Rate in the Other 49 States
http://www.twitpic.com/9g2pka/full

CHART: California State Sales Tax Rates and Governor Brown's Tax Hike Proposal Compared to the State Sales Tax Rate in the Other 49 States
http://www.twitpic.com/9gfz3z/full

Funny how only one state is tops in both categories. Despite ALREADY having high taxes, California seems incapable of living within its means. If California ALREADY has high taxes and is unable to balance its budget, is the problem that are taxes are too low? Or, is it a structural deficit where spending exceeds the capacity of the underlying economy? Perhaps a better solution would be to repair California's damaged economy and business climate.

CHART: California Rated 'F' for Small Business Friendliness. Top reason for 'F' rating--taxes
http://www.twitpic.com/9ivi6g/full

CHART: California Ranked as the Worst Place for Business for Eight Consecutive Years by Chief Executive Magazine
http://www.twitpic.com/9iuzwq/full

CHART: California has the has the nation's 3rd worst business tax climate
http://www.twitpic.com/8ntrwn/full

CHART: California was ranked #46 for small business survival
http://www.twitpic.com/7mp1zu/full

CHART: California ranked worst on least-favorable business climate survey since 2002
http://www.twitpic.com/7f05at/full

Gov. Brown said: "Well, the electorate in the middle is telling every survey that they don't want any more taxes. They are willing to see the taxes on the most affluent increase at least temporarily -- if it's for schools, for public safety and for the most vulnerable."

Governor Brown's tax hike is an example of electioneering and an abuse of the democratic process. This isn't leadership. It's simple pandering. Of course most people are willing to raise taxes on the affluent. They're willing to raise taxes on anybody as long as the taxes don't fall on them! Who wouldn't want more government spending as long as somebody else is stuck with the bill.

CHART: Governor Brown's Tax Increase: Is *THIS* What Democracy Looks Like?
http://www.twitpic.com/9ottlg/full

California State raises most of its revenues from Personal Income Tax (PIT). PIT is extremely income-progressive. The top 2-3% pay the highest effective rates, the most taxes in absolute dollars AND roughly 50% of the ENTIRE income tax bill.

Meanwhile, Governor Brown's tax hike proposal requires a simple majority to pass (unlike in the Legislature where a similar measure would require a 2/3rds majority). The bottom 50% of taxpayers (and possible voters) contribute less than 2% of the income tax bill. Meanwhile, ALL of the income tax increases fall on the top 2-3% who ALREADY pay 50% of the tax bill.

In a democracy, every eligible person gets a vote. But in California, not everybody pays the same for that one vote. It's like nine wolves and a sheep deciding what to eat for dinner.

CHART: California Income Taxes and Voting Power for the Bottom 2/3rds and Top 2%
http://www.twitpic.com/7pf2a8/full

FYI: I'm nowhere near the top 2-3% of taxpayers but I recognize an abuse of power when I see it.

I would also like to say the people don't vote for the politician to use their best judgement, we vote for a politician because of his platform. If a candidate runs on holding the wealthy and corporations to their fair share of deficit reductions and if they run on holding Wall Street accountable.......which all Democrats do........that is what we expect them to do. Gov Brown has done has fair share of cutting.....now, corporations and Wall Street need to pay!

After three years of deficit cuts through spending cuts while giving corporations $3 trillion in tax breaks, we all know it is now time for corporations to pay up. Your interview with the Gov of California didn't even hit on the problems, and certainly not the solutions. California was ground zero for the financial fraud....it handled the mortgage fraud while New York handled the financial fraud (notice they are the wealthiest states with the most income inequity....a sure sign of fraud and criminality). So,Gov. Brown needed these questions:

Given that financial analysts all say there was trillions of dollars in fraud and not one states anything less than $600 billion in fraud penalties as settlement for fraud.....and given that you allowed your Attorney General to settle for $25 billion instead, bringing pennies on the dollar back to fraud victims, how do you explain to the people who elected you why California has a deficit rather than a sizable rainy day fund? How do you justify making cuts to programs that will effect the very people who were victims of the fraud you failed to prosecute at all.

All states in the US have no deficit of revenue, they have a deficit in Rule of Law and justice. You can pretend all you want that there needs to be more cuts to social programs, but then.......you won't be a journalist, you would be a propagandist!

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