A major battle between progressive activists and a sitting governor in the nation’s largest state is nearing a conclusion today. California Governor Jerry Brown and a coalition of progressives have entered into negotiations to finalize a tax measure for the November 2012 ballot, after both sides offered competing plans.

The story is that Brown offered a measure to raise taxes for the ballot, and tied it to various cutbacks to state services. Fail to pass the ballot measure and the cuts would come down. In the world of California, where it takes a 2/3 vote to raise taxes, this was seen as a last resort in the face of resistance from Republicans. However, Brown’s measure included regressive taxes like sales tax increases, and dipped to hit people making as low as $250,000 a year. Progressives in the state, led by the California Federation of Teachers and the Courage Campaign, came up with a more popular alternative – a millionaire’s tax, which would not have any increases to the regressive sales tax, which would only raise money through millionaires, and which would route the money directly to local services rather than through Sacramento.

As the months dragged on, it became clear that the millionaire’s tax was more popular with voters. However, Brown stuck with his compromise measure, which didn’t draw fire from business groups, and he engaged in active efforts to drive the Courage/CFT millionaire’s tax off the ballot. The theory goes that multiple ballot measures on the same topic in California usually means that all of them lose. There is actually an additional tax measure in the field, from millionaire attorney Molly Munger, but that’s for an across-the-board tax increase, and it’s not seen as credible or popular.

So Brown had the funding, but Courage/CFT had the popularity; Brown’s measure was fading, with just 52% support according to the last statewide poll. So an accommodation had to be reached. According to the Sacramento Bee, here are the details:

The new deal, which could be announced as soon as today, would raise the statewide sales tax by a quarter-cent rather than half-cent per every dollar of purchase. It would retain the governor’s three higher tax brackets starting at $250,000 for single filers. But the last marginal tax hike – at $500,000 for singles and $1 million for couples – would increase by 3 percentage points rather than Brown’s original 2 percentage points.

The income tax hike on the rich would also last longer than Brown’s proposal, going for seven years instead of five. The sales tax hike would still expire at the end of 2016.

Cutting a deal so late in the signature-gathering season ramps up the pressure on proponents, as well as the costs. The new initiative would be filed in the next couple of days, sources said. The LAO has 45 days to return an analysis to state Attorney General Kamala Harris, who then must write ballot language for petitions.

If the initiative gets fast-tracked, it would land on the streets in early April under the most optimistic timetable. Proponents think they may have four to five weeks to collect a million-plus signatures, a compressed period that would raise the cost per signature.

Some key points for budget watchers: Based on Brown’s more optimistic assessment of capital gains, the plan would raise an additional $1 billion for the upcoming 2012-13 budget because it relies more heavily on the income tax increase. That hike is retroactive to Jan. 1, 2012.

This is definitely a compromise. While the sales tax element shrinks, it still exists and will open the measure up to criticism on taxing the poor and the middle class. While the tax bears more heavily on the wealthier Californians, it still dips as low as those making $250,000 a year. Incidentally, well-off Californians making under $1 million have had it very good for a long time. Under current law, the tax brackets basically end at $47,500, with another levy at $1 million. So everyone making $47,500 to $999,999 pays the same rate.

This isn’t a done deal yet; the Governor and the Courage/CFT coalition continue to work on a compromise. But this is an important moment. Jerry Brown wanted to ignore progressives who had a better idea for a winning ballot measure. He expected to just bulldoze over them. But he couldn’t. And progressives got a voice in the matter and won some concessions and a marginally better ballot initiative overall. So while I’d like to see an initiative that has a better chance of winning, and this compromise still has some elements that could be problematic, it’s a major victory for progressive power in Sacramento.

They will have to hurry, as noted above. The time frame for getting signatures is extremely tight and will be expensive.

David Dayen

David Dayen