Tax-Hike Initiative:

Reiner Preschool Initiative To Hike Taxes $2.3 Billion a Year

Movie producer/actor/social activist Rob Reiner this week rolled out a $2.3 billion-a-year tax increase proposal for high-wage earners to finance a universal preschool program for all California 4-year-olds.

It is the third major initiative he has helped bankroll with his money and name in recent years, starting with the 50-cents-a-pack tobacco tax for children's programs in 1998. He also pushed, then dropped, a split-roll property tax proposal for the March 2004 ballot to finance preschools.

This latest initiative, aiming for the June 2006 ballot, would slap a 1.7 percent surtax on individuals' income over $400,000 a year and joint filers with more than $800,000 in annual income. It would pay for preschools in the public, private and faith-based sectors, initially aimed at areas where kids are low-performing in K-12 schools, then expanding to all children whose parents want them to participate.

In Los Angeles, Mr. Reiner, famous for playing the "Meathead" role in the Seventies sit-com classic "All in the Family," told reporters his initiative "not only provides a quality preschool experience for all 4-year-olds, but it's the beginning of a process by which we strengthen the educational system, build a stronger economy and also reduce crime." He said his measure seeks to have at least 70 percent of the state's 500,000 4-year-olds enrolled in preschools, compared to 47 percent today.

While acknowledging the apparent advantages of preschool training for children, Cal-Tax President Larry McCarthy questioned the need to raise taxes to pay for such a program.

According to Mr. McCarthy, the tax would also seriously hurt the state's many unincorporated businesses, imposing almost a 33 percent higher tax than corporations. The cost of doing business in California already is substantially higher than other states.

In the Los Angeles Times, Mr. McCarthy called the initiative "a bad idea … I think that we're sending a message to higher-income Californians that, if you stay here and maintain a residence, you will be tagged with more and more responsibility for various programs, and it's an unwelcome signal."

Mr. McCarthy also said that the top 10 percent of Californians' taxpayers already pay 75 percent of the income taxes, making the state the most progressive in the nation for taxing those at the high end. Another tax on the wealthy would make California's volatile income tax system even more volatile – at a time many policy-makers are urging greater stability, he said.

It doesn't take many millionaires to vote with their feet, moving their residences to Nevada or another state with lower or no state income taxes, to make a significant dent in the state's tax revenue, he said.

Cal-Tax issued a commentary April 20 on the Reiner initiative.

At least two newspaper editorials lambasted the Reiner proposal. The Los Angeles Times on April 21 published an editorial opposing the Reiner initiative, calling it "tax folly." The Riverside Press-Enterprise, in an April 20 editorial, said taxing the rich "holds a superficial appeal. But chasing entrepreneurs out of California and basing large new spending commitments on fickle revenues is not what this state and its budget deficit need."

Public employee unions are getting behind the proposal, envisioning 10,000 more teachers and 10,000 more teaching aides. There would be two teachers and an aide in each classroom of no more than 20 children. Existing child-care programs could apply for the program funding if they meet state standards.

The California Teachers Association has not positioned on the measure, after being a partner with Mr. Reiner in last year's scuttled split-roll initiative. Mr. Reiner has been reported to have had talks with the Service Employees International Union, which represents thousands of state employees and would be expected to try to organize preschool teachers and staff.

Governor Arnold Schwarzenegger, who championed an initiative to fund after-school programs a year before running for governor in the 2003 recall election, has not positioned on the Reiner proposal.

Caltaxletter April 22, 2005