The issue of taxes has been one of the most contentious in the gubernatorial campaign, fueling a heated exchange during a debate and spawning a controversial commercial that pulled Bill Clinton into the race.
California Watch has been tracking every tax-related comment, promise and deflection by Whitman and Brown over at Politics Verbatim. This post is the third in a series that is using those records to lay out each candidate's stance on a specific issue in detail. As we count down to Election Day, we'll also be going in depth on what the candidates plan to do about the environment and jobs as well as taking a look at their personal history.
Lowering or eliminating various taxes is a central part of Republican nominee Meg Whitman’s platform. She acknowledges the state cannot afford an “across-the-board” tax cut right now and advocates instead “targeted tax cuts” she says will spur economic growth.
While Democratic candidate Jerry Brown agrees with Whitman on some things – the idea of streamlining regulations, for example – the attorney general has hammered Whitman’s plan to eliminate the capital gains tax.
Whitman maintains the tax, which typically applies to stock holdings and other investments, is crushing California businesses. Without it, she says, businesses would be able to grow and hire new workers – which, in turn, would create new sources of tax revenue for the state.
“Excessive taxation starves our economy of innovation and entrepreneurship,” the former eBay CEO says in her official policy agenda. “We need to build the new California economy with the goal of making it easier to start a new business and create jobs in our state.”
Brown contends the move is nothing more than an attempt by Whitman to enrich herself and her wealthy backers. The loss of capital gains taxes would be catastrophic for the cash-strapped state, he says, and would have a direct impact on education funding.
Whitman has also advocated the elimination of the $800 start-up fee for limited liability corporations. In one of the most heated moments of the campaign, Brown turned directly to Whitman during the San Rafael debate and said: "Ms. Whitman, I'd like to ask you, how much money would you save" through her tax-cut proposals.
Whitman responded: "I'm an investor, and investors will benefit from this, but so will job creators."
"My business is creating jobs, and yours is politics," she retorted. "You've been part of the war on jobs in this state for 40 years."
Brown has continued to hammer Whitman over the issue since. After the debate, the Brown camp sent out a press release demanding to know how much Whitman herself would save if the capital gains tax were eliminated. At a recent campaign stop in San Francisco, Brown said: “The truth is she wants to enrich herself and her contributors and the very wealthiest people in our society.”
Whitman has told reporters that the notion that “I would run for governor to enrich myself is ridiculous.”
“It’s a political stunt, it’s class warfare,” the Associated Press quoted her as saying.
For Whitman’s part, she has sought to portray Brown as a tax-raiser, arguing that a vote for Brown is essentially a vote for higher taxes. Brown has repeatedly promised no new taxes without voter approval.
Brown’s tax record was the theme of one of the most talked-about commercials of the debate, a 30-second spot starring former President Clinton. In the clip, pulled from a 1992 presidential primary debate, Clinton cited a CNN poll to accuse Brown of raising taxes as governor and then misrepresenting his record. The ad, which independent analysts and fact-checking groups widely said was misleading, incensed the Brown camp and prompted Clinton to endorse Brown. (The two campaigned together at UCLA last week.)
Beyond the capital gains tax, Brown and Whitman do share some common ground. Both agree regulations are making it difficult for businesses to operate in the state. Whitman has called for a moratorium on all new regulations. Brown says he will review existing regulations to screen out those “proving to be onerous or otherwise impeding economic growth.” New regulations must “not go beyond what is reasonable,” he says in his jobs plan.
Whitman wants to eliminate sales taxes on factory equipment. Brown also says he would consider reducing or eliminating the tax in an effort to spur manufacturing jobs. In interviews, he has said he would support tax credits to other "key industries," like "high-tech, movies, agriculture (and) the port operation to the Pacific," as incentives to keep them in California.
The attorney general has also voiced support for restructuring the tax system to "lower the marginal rates and spread out the base." But such a process must be coupled with reduced spending in other areas and cannot happen instantly in the midst of a multi-billion-dollar budget deficit, he said in an interview with CNBC earlier this year.
In her official policy agenda, Whitman also details her plan to provide tax incentives to encourage research and development as well as water conservation in the agricultural sector.