Tax Increases and Voter Distrust
The California budget passed on time and without much drama this June, as tax revenues once again exceeded expectations because of the improving economy. The new budget will increase education spending, restore some human services funding cuts, pay down the government’s debt, increase the rainy day fund for future recessions, and support drought emergency funding—all without any new taxes. Still, many lawmakers and advocacy groups argue that the state’s tax system must change in order to generate adequate revenues for current spending while making future investments. In this context, the governor has called for special legislative sessions to find new funding for rising health care costs and transportation projects. At the same time, several interests groups are preparing tax initiatives for the November 2016 ballot.
Many political experts believe that the upcoming general election will be the most opportune time in the next four years to ask California voters to raise their taxes. The presidential race is likely to produce a high voter turnout and, specifically, a more youthful and liberal electorate with pro-tax leanings. Voters are currently in a relatively good mood about state leaders and their own finances.
In our May poll, we tested support for five tax proposals that are being considered by the legislature and tax proponents. Support among likely voters for four of the five proposals was underwhelming (41% sales tax extension, 46% Proposition 30 tax extension, 47% oil and natural gas severance tax, 50% commercial property tax increase, 67% cigarette tax increase). What explains voters’ reluctance to increase state taxes?
For one thing, despite improved fiscal conditions the widely-held perception that “the people in state government waste a lot of the money we pay in taxes” has hardly budged in four years (58% May 2011, 57% May 2015). Today, across all political and demographic groups, large proportions of likely voters say that there is a lot of wasted tax money.
Meanwhile, the perception that the state’s budget situation is a “big problem” is down sharply from four years ago (82% May 2011, 52% May 2015). Still, a majority holds this negative fiscal view even during these exceptionally good times. And there is an important connection between these two fiscal perceptions: among the likely voters who say the state’s budget situation is a big problem, 78% say that the people in state government waste a lot of tax money.
Notably, support for all five of the tax proposals is significantly lower among those who say that the state government wastes a lot of money. Even for the cigarette tax increase, two-thirds favor falls to 58% in this group, indicating that support for this popular tax proposal could erode in an election campaign. In sum, voter distrust will be a big hurdle for gaining majority support for new taxes in 2016.
Tax proponents may take solace in the fact that a majority of likely voters say that the state and local tax system is in need of major changes. However, support for making major tax changes has declined as the state’s budget situation has improved (65% January 2011, 54% May 2015). And the desire for major tax changes is tied to distrust: 70% with this view say that the state government wastes a lot of money.
Majority support for the Proposition 30 tax increase in November 2012 offers a textbook example of how the stars can align in a presidential election. But the PPIC poll tells us that voter distrust is a major obstacle even in good budget times. Voters will want assurances that current funds are well managed but inadequate—and that new taxes are needed for essential purposes. The special sessions could be a unique opportunity to begin a public dialogue about the fiscal ingredients necessary for creating a better future for all Californians.