Gov. Brown Pitches for Higher Taxes in Annual Address

California - Gov. Jerry Brown gave Californians a choice between higher taxes and deeper cuts to public schools and other core functions of government during his State of the State address Wednesday, essentially beginning his campaign for a planned November ballot initiative seeking to raise taxes.

Immediately afterward, he was leaving for two days of public appearances in Southern California, where he will make his pitch to teachers, business executives and civic leaders.

The Democratic governor said his push for temporary tax increases to the wealthy and the state sales tax are the best options to end California's cycle of budget deficits and cutbacks to teachers, social service programs and health care services for the poor. He noted that his budget for the coming fiscal year closes a $9.2 billion deficit with a roughly equal proportion of spending cuts and tax increases.

"Neither is popular but both must be done," he said.

Despite support from within his own party, Brown's path to November will not be easy.

At least two other groups are proposing their own tax initiatives for the ballot, creating a logjam of similar issues that could confuse voters and lead them to reject all the proposals. At the same time, Republican lawmakers and anti-tax advocates are prepared to counter the governor's proposal by saying state government is still unable to control its spending.

The Republican leaders of the Assembly and Senate issued a joint statement criticizing Brown's address even before it was delivered to a joint session of the Legislature.

"Unfortunately, the governor's vision is centered around one thing -- higher taxes," said Assembly Minority Leader Connie Conway of Tulare. "Governor Brown says that the sky will fall if Californians don't agree to a $35 billion dollar tax increase. You and I know that this simply isn't so."

That led Brown to open his address with a bit of levity, saying the GOP leaders must be clairvoyant and wondering if they might also be able to provide stock tips.

While Brown's speech promoted an optimistic vision of California's future, it also hit on his top priority for the year.

Brown has said his tax hike would generate $7 billion a year through 2017, by raising income taxes on individuals who make $250,000 a year or more and boosting the state sales tax by half a cent. The Legislative Analyst's Office differs on the amount of revenue likely to come from the wealthy and says Brown's plan actually will generate far less -- about $4.8 billion a year.

He said he is prepared to make even more spending cuts in the year ahead because "the situation demands them," but also said imposing higher taxes, especially on the wealthy, was needed for a balanced approach.

"As for the initiative, it's fair, it's temporary, and it's half of what people were paying in 2010," Brown said. "And it will protect our schools and guarantee -- in the constitution -- funding for the public safety programs we transferred to local government."

Republicans noted that California's economy was beginning to improve, and as a result tax receipts were beginning to rebound. That should be a reason to avoid the types of the tax increases Brown is seeking, they said.

"He praises the 1 percent, those entrepreneurs who come up with those wonderful ideas, yet his budget is proposing a massive tax increase on those very entrepreneurs, which will discourage them from investing," Assemblyman Jim Nielsen, R-Gerber, said after the address.

Wednesday was the second State of the State address of Brown's third term in the governor's office, coming after a year in which he failed to persuade Republicans to go along with another tax plan. Last year, he wanted the Legislature to extend a series of expiring tax hikes but could not muster the required two-thirds vote.

His pitch largely paralleled the priorities he outlined earlier this month in releasing his budget for the 2012-13 fiscal year, a spending plan that calls for continued cuts to welfare and social service programs such as in-home support. Brown has warned that if Californians reject his tax plan in November, he will call for $5.4 billion in immediate spending cuts that will hit public schools the hardest.

Those cuts could reduce the school year by three weeks, after it already dropped from 180 days to 175.

The governor has argued that the temporary tax increases are necessary to stabilize California's finances as it emerges from a recession that has seen the unemployment rate soar and government tax revenue plunge. State tax revenue has dropped by $17 billion since the recession began in late 2007.

Brown also seeks to improve government efficiency and pay down debt.

One of his top priorities is enacting changes to the public employee pension system, which is underfunded by at least $75 billion. The governor has introduced a detailed plan to revamp the system and said the Legislature must approve something close to those reforms to gain credibility with voters.

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