Brown, Whitman spar over capital gains tax cut
Democratic gubernatorial candidate Jerry Brown Thursday warned that Republican Meg Whitman’s plan to eliminate capital gains taxes would require deep cuts in education.
Standing in front of Dorris Place Elementary School north of downtown Los Angeles, Jerry Brown said wiping out California’s tax on capital gains would be devastating to public education.
“That will put a $5 billion hole in our state budget," he said. "It will be the equivalent of thousands of teachers as you can see on this board over here.”
Brown pointed to a whiteboard with the number 32,977.
Across the street, a spokeswoman for Whitman watched the gaggle of news reporters and cameras around Brown. Andrea Jones Rivera called Brown’s claim a scare tactic by him and the union that represents public school teachers.
“Meg will not cut funding for education. That is not in her plan," she said. "That is not what the capital gains tax does.”
In fact, Jones Rivera said ending taxation on capital gains – money people make when they sell an asset like a home, business or stocks – will actually increase revenue to the state.
“If you cut capital gains, you increase revenues based on creating more jobs – and therefore you will have more money to put into education.”
Republicans have long argued that taxing investors less means they can invest in job-creating businesses more.
Jean Ross of the nonpartisan California Budget Project isn’t so sure those investments would end up in California.
“Most investors have broadly diversified portfolios. They are investing all over the world," Ross said.
"So there’s no economic evidence to suggest that you would recover anywhere near the benefits that you would need to the California economy to pay for a tax cut of that magnitude.”
Ross said the loss to the already battered California budget may be $7 billion – not Brown’s estimated $5 billion – because many people would make sure more of their income is from sources defined as capital gains.
Ross also addressed Whitman’s argument that she could avoid cutting education.
“Mathematically, it might be possible. In reality, it would be tough.”
Ross said there would have to be massive cuts in health care, higher education and prisons to protect K-12 education. Whitman has said she plans to make deep cuts in welfare spending – and reduce the state workforce by 40,000 workers. She’s offered few details.
In questioning Whitman’s plan to end the capital gains tax, Brown has also wondered how much the billionaire businesswoman would avoid in taxes with her plan.
“How much would she get by cutting this tax?”
He claimed he’d calculated it at nearly $15 million.
“I have no idea and that’s not what’s at issue here," Whitman spokeswoman Jones-Rivera said.
During this week’s debate, Whitman also would not disclose how much she might have to gain. She went on to call herself an investor and job creator.