California's anti-tax crusaders talk revolt

By Dan Whitcomb

LOS ANGELES (Reuters) - Taking inspiration from a landmark 1970s tax revolt, a determined group of activists say the moment is right for another voter uprising in California, where recession-battered residents have been hit with the highest income and sales tax rates in the nation.

And like Proposition 13, the 1978 ballot measure that transformed the state's political landscape and ignited tax-reform movements nationwide, they see the next backlash coming not from either major political party, but from the people.

If the anti-tax crusaders can galvanize voter discontent, they hope to roll back the latest tax hikes, impose permanent, iron-clad spending caps on Sacramento lawmakers and make the issue central in the 2010 gubernatorial election.

"There's a lot of latent anger boiling to the surface out there," said Jon Coupal, president of the Howard Jarvis Taxpayers Association, a group named after the California anti-tax crusader who spearheaded Prop 13.

An angry mob of thousands converged on an Orange County parking lot in southern California on a recent Saturday morning for an anti-tax protest, stunning even the organizers with the size of the turnout. It was just one in a series of public demonstrations that have cropped up around the state.

Talk of a brewing tax revolt has been largely ignored by the mainstream media, and many political analysts are skeptical, though they concede that the taxpayer mutiny that led to the landmark Prop 13 was similarly dismissed by political professionals.

That referendum passed in a landslide despite furious opposition from the political establishment -- and highlighted the possibilities for grassroots campaigners to enact measures with ballot initiatives and bypass the legislature.

It slashed property tax rates by 57 percent, capped future collections and required any new tax hikes to be approved by a two-thirds majority in both houses of the state legislature.

'CONDITIONS ARE RIPE'

"There's no way to predict whether we're going to see a reprise of the revolt that led to Prop 13 or whether this is a false start," said Dan Schnur, director of the Jesse Unruh Institute of Politics at USC and a onetime adviser to presidential candidate Sen. John McCain.

"But the economic conditions are ripe for tax revolt, and advances in technology certainly make it easier to organize a coalition without access to huge amounts of money."

Those conditions include a heavy tax burden that is growing heavier plus a worsening economy.

California already had the highest income tax rates of any state in the country when the legislature raised them in February to help close a $42 billion deficit that also required deep spending cuts and additional borrowing.

The state's top income tax rate is now 10.425 percent, which is 1.5 percentage points higher than second-place Rhode Island and rises to 10.55 percent if certain economic triggers are hit. Most U.S. states have a top rate of less than 7 percent, and seven collect no income tax at all.

California lawmakers also boosted the state's sales tax to 8.25 percent, nearly doubled the vehicle license fee and sharply reduced the tax credit for dependents.