SACRAMENTO, CA - Remember the old Bugs Bunny cartoons where Bugs and Daffy Duck argue over whether it's rabbit season or duck season? Well, it's June in Sacramento so it must be budget battle season. This year, however, lawmakers don't have to hunt very hard for tax dollars because California's economic rebound has provided them with an unexpected bonanza: an estimated $2.3 billion in extra tax revenues over the next two years. Putting an extra $2.3 billion in front of politicians would ordinarily engender Pavlovian salivation of epic proportions. California's Proposition 98, however, requires that if the state decides to spend this surprise windfall, all of the money must be spent on education programs. The only alternative to pouring these dollars into the government education till would be for the state to decide not to spend the money and give some or all of it back to taxpayers through a tax cut.

Here is where things get interesting. Assemblyman Tom McClintock (R-Simi Valley) has authored an income-tax-reduction bill that would return about half ($1.2 billion) of the state's revenue windfall back to state taxpayers. As opposed to previous Republican tax-cut proposals which have been directed at all income groups across the board (and which Democrats have attacked, unfairly, as favoring the rich) McClintock, in a deliciously clever move, has targeted his tax cuts at low-income taxpayers. McClintock's tax-cut legislation would more than double the standard deduction for these taxpayers (i.e., more of the income of these low-income individuals would be exempt from state taxation). For example, a single mother with two children currently pays tax on income over $20,000. Under the McClintock plan, that same single mother would have the first $28,000 of her earnings exempted from the state income tax. In total, 1.4 million low-income taxpayers would end up paying no state tax and 7 million lower-income taxpayers would receive a tax cut.

McClintock's tax-cut proposal places legislative Democrats on the pointy horns of a difficult political dilemma. On the one hand, McClintock's plan directly benefits the Democrat's main constituency, i.e. low-income individuals. Yet, if the Democrats support a tax cut for these working-class taxpayers, they divert revenues that would have benefited big public education interest groups such as the teachers unions which funnel huge amounts of money into Democratic campaign coffers. The Democrats must therefore decide to side with either their voters or their financiers.

At present, the Democrats, although they haven't officially said "no" to McClintock's proposal, have given clues as to where their loyalties lie. In their budget deliberations, Democrats in the State Senate have indicated that they not only want to dump the entire revenue windfall into education spending, but that they would also actually increase education spending by hundreds of millions of dollars on top of that.

Prediction: if Democrats end up throwing in their lot with their financiers, their voters may end up throwing them out of office.

-Lance T. Izumi