Clock ticks on progressives' tax push

Politico

2 days ago

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MONEY MAKER — This year in the California Legislature, tax season falls in June.
Progressive Democrats racing against a looming deadline to approve the state budget are pressing to hike taxes on large corporations to address California's $12 billion budget shortfall while minimizing cuts. But they haven't agreed on how to do it and are running out of time.
Rank-and-file Democrats in the Assembly and Senate are floating an array of proposals, from targeting offshore tax havens to penalizing companies that employ large shares of Medi-Cal recipients, according to interviews with more than a dozen lawmakers.
'We know that if we're going to mitigate these budget cuts, that we really have to have a solution,' said Assemblymember Sade Elhawary, a first-term lawmaker from Los Angeles.
Still, Senate Pro Tem Mike McGuire and Assembly Speaker Robert Rivas have given no public indication of support as they grind through budget negotiations, though some of the lawmakers said Senate leaders are further along in their deliberations.
The lack of consensus — and a fast-approaching June 12 deadline for the Legislature to get a joint budget proposal into print — have imperiled attempts to raise revenue and limit cuts. Even if a two-house deal is struck, legislators would need buy-in from Gov. Gavin Newsom, who has swatted down Senate-backed tax hikes during his tenure, even if he did agree to suspend some corporate tax breaks last year.
Nevertheless, progressives see a need, if not an opportunity, to pursue tax hikes on big businesses as the state faces projected shortfalls each year through 2029 and as Republicans in Congress mull major spending cuts to Medicaid and other programs.
Related: 'Lawmakers consider new corporate taxes to stave off Medi-Cal cuts' (POLITICO Pro)
Assembly Democrats met behind closed doors Tuesday and discussed raising taxes for 'water's-edge' filers — multinational companies that do business in California — according to one lawmaker who was at the meeting. They also talked about placing higher taxes on people's second and third homes.
Senators in recent days have pushed to make corporations pay more, perhaps by penalizing businesses that have large numbers of employees with low enough incomes to qualify for Medi-Cal — a proposal that moderates stopped back in 2013. But tax issues didn't come up Tuesday during a Senate Democratic Caucus meeting, said an attendee.
SEIU California has floated several proposals to Newsom and legislative leaders, and union members Saturday solicited signatures for a letter that outlined some of them, which Playbook obtained. Cuts to spending on in-home care, including to providers' overtime, in Newsom's May budget proposal have prompted the union to get involved.
Members of the Latino Caucus — which is fighting the governor's proposal to cap Medi-Cal enrollment for undocumented immigrants and require those recipients to pay premiums — have pitched tax increases as a way to prevent those reductions.
'We're not accepting a two-tier system,' said Elhawary, a member of the Latino Caucus, who is pushing for increased taxes. 'I think that we probably have a majority in both houses that are really looking at it. It's just figuring out which are the best options.'
The Medi-Cal issue, along with a heftier spending plan from the Senate, have created disagreement between the chambers, according to two of the people interviewed, who were granted anonymity to discuss private deliberations.
If tax-hike talks peter out during this summer's budget negotiations, they could still come back in the fall. State Sen. Anna Caballero predicted the Legislature will likely have to come back then and adjust its budget if and when Congress passes its megabill.
Tax increases will be necessary, state Sen. Sasha Renée Pérez argued — 'especially if we see the Trump big ugly bill pass.'
— with help from Tyler Katzenberger and Lindsey Holden
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WHERE'S GAVIN? Nothing official announced.
ON THE AIRWAVES
BILINGUAL GOP — The NRCC is defending President Donald Trump's budget megabill by going on the offensive with a Spanish-language ad blitz in the Central Valley.
The digital ads accuse Democratic House members of supporting the 'largest tax increase in generations' by opposing the GOP's efforts to extend 2017 tax cuts. Among those targeted are battleground Reps. Adam Gray and Josh Harder — as well as Reps. Jim Costa and Raul Ruiz, whose districts lean bluer but have shifted closer to Trump in recent cycles.
Christian Martinez, the NRCC's national Hispanic press secretary, said those Democrats' votes against the bill 'betrayed our Latino communities.' Meanwhile, Democratic lawmakers have hammered the GOP over the bill's provisions that would slash spending on Medicaid, food stamps and other safety-net programs.
CONVENTION EXTRAS
REFUND THE POLICE? — One item that flew under the radar at the California Democratic Party's convention last weekend: the party's complete about-face on the 'defund the police' movement.
Party delegates approved, on a simple consent vote, a resolution that calls for 'full staffing' in police departments. The measure passed with little fanfare, on the final day of the convention after many delegates had already boarded flights home from Anaheim.
But it illustrated just how much the pendulum has swung in terms of how Democrats view issues of police accountability.
Just five years ago, delegates to the party's 2020 convention approved a resolution — amid a national debate about race following George Floyd's murder — that stated the 'California Democratic Party supports police defunding.' It called for redirecting money to programs to combat the unjustified use of lethal force against people of color.
The latest resolution was sponsored by San Francisco County Democratic Party leaders and was part of a larger package of proposals to shift Democrats away from so-called identity and performative politics.
Marjan Philhour, a San Francisco party official who wrote the resolution, said its approval suggests party insiders are ready for new messaging on law-and-order issues. She said the 'defund the police' movement alienated many Chinese and AAPI voters who had traditionally leaned Democratic.
'The extreme left is facing a reckoning,' said Philhour, who's vying for a seat on San Francisco's Police Commission. 'Public safety is really core to the functioning of cities.'
STATE CAPITOL
CHEERS — Assemblymember Matt Haney's bill to give cities the option of allowing bars to serve alcohol until 4 a.m. on weekends in dedicated zones cleared the Assembly on Tuesday and is headed for the Senate. The passage was no small feat. More sweeping proposals to allow some bars to stay open until the same hour have failed year after year in the state Legislature, including a 2022 proposal that fell far short of the votes it needed in the lower house.
CLIMATE AND ENERGY
SOLAR WARS PT. III — The saga of California's ever-evolving rooftop solar subsidies is set to take a turn today when the California Supreme Court hears arguments for and against the California Public Utilities Commission's role. At the same time, lawmakers are set to take their own bite out of the debate with consideration of a bill that goes even further than the CPUC in slashing subsidies. Read more about the fights in last night's California Climate.
Top Talkers
BRIBERY PROBE GROWS — Federal prosecutors told San Leandro Councilmember Bryan Azevedo that he is the target of an investigation into potential crimes including bribery and lying to federal agents, the San Francisco Chronicle reports.
The U.S. Attorney's Office for the Northern District of California sent a letter to Azevedo on May 12, telling him to contact prosecutors if he was 'interested in resolving this matter short of an indictment.'
HIGH STAKES — Sales at California's cannabis stores have hit a five-year low following an 11 percent drop in transactions, SF Gate reports. Experts have warned that the industry is in trouble, plagued by high regulatory fees, taxes and competition from the unlicensed market.
AROUND THE STATE
— The Fresno Police Department has 66 open positions despite having the largest force in the city's history. (The Fresno Bee)
— A 70-year-old man in El Sereno is protesting his eviction by camping out in a tree house in his backyard — five years after he illegally seized the vacant state-owned home. (Los Angeles Times)
— San Luis Obispo County's first battery plant, the Caballero Energy Storage project, is up and running. The facility can power 100,000 homes for up to four hours. (The San Luis Obispo Tribune)
PLAYBOOKERS
PEOPLE MOVES — Charlie Arreola is the new director of external affairs and partnerships at the state Office of Exposition Park Management. He previously served as the Southern California organizing director for Harris for President in 2024.
— David Bournazian has joined the firm Norton Rose Fulbright's product liability and consumer disputes practice as a partner in the Los Angeles office. He joins NRF from K&L Gates.
— Anthony Martinez is now manager of marketing and communications at the California ISO. He previously served as senior communications adviser and digital director at DOE throughout all four years of the Biden Administration.
BIRTHDAYS — Christian Arana at the Latino Community Foundation … Meta's Ryan Daniels … Andre de Haes at Backed VC
BELATED B-DAY WISHES — (was Tuesday): Jacqueline Hartsough in the office of Rep. John Garamendi … (was Monday): Emeryville Councilmember Courtney Welch (cocktail: tequila, neat with lime)
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