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May 15, 2017

The Cold Partisan Reality of the California Gas Tax Legislation

We take a break from our regularly scheduled program, “California Needs More Moderate Democrats in Sacramento,” to bring you this news flash:  California—and especially its private sector economy—needs more Republicans in Sacramento.

As everyone now knows, the Democrats won two-thirds supermajorities in both houses of the Legislature last November. They briefly held a slim supermajority in 2013, but for various reasons they didn’t flex those muscles and soon fell back below two-thirds. This time, however, looks to be different.

Just as most of us were getting ready to file our tax returns, Governor Jerry Brown and the Democratic leaders of the Legislature strolled out to the east steps of the state Capitol and announced that they had reached agreement on legislation imposing a huge $52 billion tax increase over the next decade. This is needed, we are told, to fix California’s crummy roads, highways and bridges. The photogenic backdrop for the announcement was a gaggle of union members and local government officials, all hungry for this promised infusion of money. Hard to blame them.

There is some irony here, of course. The private sector union members standing behind the Governor and the beaming legislators are among the Californians who will be hit hardest by the regressive increases in gasoline and diesel taxes at the heart of this plan, known as SB 1.

In the days that followed the celebratory announcement, the legislation was revealed to the public and rushed through committees and onto the floor of each house. It was a box-checking exercise, not meant to elicit constructive testimony that can educate legislators and improve their ultimate work product. The goal was to get the bill to the floor of each house and get the vote done fast, because with every hour that passed, more Californians heard news about the huge tax hikes aimed at them (12 cents per gallon more for the excise tax on gasoline, 20 cents per gallon more for the excise tax on diesel, plus an additional 4 percent hike on the diesel sales tax). Angry calls and emails to legislators began to pour into the Capitol.

And therein lies opportunity, perhaps, in the next election.

This was a party-line vote. Only one Republican in the Legislature voted for SB 1 (Sen. Anthony Cannella of Ceres), while two Democrats voted against the tax measure (Sen. Steve Glazer of Walnut Creek and Assembly member Rudy Salas of Bakersfield).

Republicans now have an opportunity to challenge Democrats on an issue that is highly unpopular, according to surveys. Governor Brown surely knows this, given his previous insistence—back when he still had to face the voters—that voters should pass judgment on a major tax increase, which led to the 2012 ballot measure increasing income taxes on wealthy taxpayers (Prop. 30). Brown has said that the voters approved it because it raised taxes on someone else.

Not the case this time. A 43 percent increase in gasoline taxes hits almost every Californian, and hits those in lower income brackets hardest. The voters weren’t consulted, they were ignored.

Republicans can build a campaign theme around the legitimate worry voters will feel, knowing that if the Democratic supermajority in Sacramento can muscle through a $52 billion tax increase that hits nearly every Californian every time they gas up, they might not stop there.

For interests representing businesses, a window of opportunity like this cannot be lost. The many trade associations and groups representing business interests must band together and provide the political backing needed to help Republicans take seats wherever possible, to not only reduce the Democratic majority below two-thirds but to also build a cushion—and keep building.

Much has been written and said about the decline of the Republican Party in California, and much of it is accurate. But continued decline is not written in stone. Republicans can restore their relevance by focusing on economic issues in working-class neighborhoods. At the same time, Republicans must adapt to the social-political complexities unique to California. The state is really a collection of several states; a Republican elected in Kern County and a Republican who can be elected in places like the East Bay Area or the Inland Empire, may have profound differences on many social issues and even on matters that affect the economy, like environmental regulation. But neither of them will be able to accomplish anything for their constituents if they can’t find a way to unite around economic issues, tolerate the differences that reflect the different “states” they represent within California, and rebuild their ranks in the Legislature.

In March, during the Western Growers Board of Directors meetings in Sacramento, our volunteer leaders took a few hours during one evening to participate in a political fundraiser for the Republicans in the Legislature. Some smart political operatives in Sacramento might scoff at that, calling it a waste of time. We can’t predict whether Republicans can regain their relevance in Sacramento anytime soon, but we know how this story ends if California’s business community gives up.