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Brown Tax Would Miss Estimate by $2 Billion, Analyst Says

March 16 (Bloomberg) -- Governor Jerry Brown’s tax-increase compromise, reached with a California teachers union this week, would fall more than $2 billion short of his forecast next year, according to a legislative analysis.

The temporary income- and sales-tax increases Brown wants voters to pass in November would generate $6.8 billion in the fiscal year that starts July 1, not the $9 billion Brown’s budget office estimates, the Legislative Analyst’s Office said today in a report.

Brown’s March 14 accord with the California Federation of Teachers combines elements of his proposal with their competing measure. The deal between the Democrat and the state’s second-largest school union, which had campaigned for a so-called millionaires’ tax, raises the burden on top earners while curbing a sales-levy increase sought by the governor.

The agreement would ask voters to raise the sales tax, already the highest in the U.S., to 7.5 percent from 7.25 percent, and boost rates on income starting at $250,000. Those making $1 million or more, now taxed at 10.3 percent, would pay 13.3 percent, the most of any state.

Brown wants to use the money, coupled with spending cuts, to offset a projected $9.2 billion deficit over the next 15 months. If voters reject the increases, he has proposed cutting almost $5 billion from school budgets next year.

California’s Legislative Analyst’s Office doesn’t calculate as much capital-gains tax income as Brown’s forecast, said H.D. Palmer, the governor’s finance spokesman. The analyst’s office had previously made a similar projection about his initial proposal, before the compromise.

“It’s the same difference, just a different initiative,” Palmer said by telephone.

To contact the reporters on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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