Becerra’s First Test Is Whether to Reform Spending or Raise Taxes

California’s governor-elect, Xavier Becerra, enters office with a large budget, looming fiscal pressures and a Legislature controlled by his party. The central question Bill Whalen and Lee Ohanian raised is whether he will try to make government work more efficiently—or seek additional revenue from taxpayers while leaving the spending system largely intact. Ohanian argued that new taxes would not address what he sees as the deeper problem: public money is not being spent effectively. He also doubted Becerra would take on the interests that could resist changes to how the state operates.

The election returns they discussed were still incomplete. Becerra had about 64% of the vote on the morning after Election Day, a larger margin than the 58–42, 59–41 or 60–40 results that Ohanian said were typical of California governor’s races. The Republican nominee, Steve Hilton, had offered proposals on schools, energy costs and taxes that Ohanian considered broadly nonpartisan. But Hilton’s campaign, Ohanian said, did not make much of a dent. He thought Hilton might have gained a few points had Donald Trump not chosen him months earlier, and that more money for television ads could have helped.

Whalen described the problem as a recurring one for California Republicans: a candidate may have enough support and resources to finish second in the open primary, then struggle to fund a statewide general-election campaign. A candidate facing a two-to-one voter-registration disadvantage, he argued, needs television visibility; visits to all 58 counties and a list of proposals are not enough if voters do not see the campaign. Whalen recalled Meg Whitman’s 2010 race, when she spent $160 million of her own money and lost to Jerry Brown. He suggested Republicans might focus more on ballot propositions rather than relying on statewide candidates as their main route to influence.

The election produced other large Democratic margins, though the figures Whalen cited were provisional. He said California appeared on track to add five Democratic seats in Congress, which would leave the state’s 52-member delegation at 48 Democrats and four Republicans. He described some of the affected districts as having been redrawn to favor Democrats, including districts where Republican incumbents had moved or left rather than run in the same seat.

Ohanian offered a cost-of-living explanation for Democratic gains in some conservative areas. He said communities facing high energy costs, including farming areas where fuel is a significant expense, were reacting against candidates associated with leaders voters believed had raised their cost of living. He pointed to California’s high gas prices and to diesel costs, which he said were also affected by the Russia–Ukraine conflict. In his account, those concerns could outweigh candidates’ local appeal.

But Becerra’s victory, the speakers argued, did not settle what direction his administration would take. Whalen noted that Becerra’s transition was being led by Nicole Elliott, a former director of the state Department of Cannabis Control who had worked on marijuana legalization with Gavin Newsom. Elliott is married to Jason Elliott, a former Newsom deputy chief of staff who sits on the high-speed rail board and had worked on housing and homelessness during the pandemic. Whalen raised those connections as part of the question of whether Becerra would continue Newsom’s approach or establish a different one.

Becerra’s early comments on taxes left that question open. On wealth taxes, he said that if the state could show billionaires were paying a lower tax rate than firefighters, teachers or nurses, they were not paying their “fair share.” On corporate taxes, he said there was corporate welfare in the form of tax breaks for companies that did not need them. Asked about a mileage tax, he said everything should be on the table.

Ohanian saw the mileage-tax comment as politically risky. He argued that California already had high taxes and that a charge based on miles driven would fall on voters who had supported Becerra. Whalen noted that a mileage charge might be presented as a way for electric-vehicle drivers to contribute to road funding when they do not pay gasoline taxes. But he also pointed to the tension with the state’s effort to move drivers away from fossil fuels. He recalled that an earlier increase in gasoline and diesel taxes had led to a state senator’s recall.

Ohanian’s prediction was that Becerra would find it politically easier to seek additional revenue than to challenge the interests shaping spending. He said that even an effort to use AI to process work long handled by people could provoke resistance from state unions. He did not expect Becerra to take that on. In Ohanian’s view, the choice was not simply between new taxes and spending cuts: it was between trying to improve the state’s ability to deliver services and expanding revenue to support the existing system.

The ballot measures offered no simple mandate on taxation. The proposed billionaire wealth tax, Proposition 40, was losing in the returns Whalen cited, while Proposition 3, which would make a temporary surcharge on top earners permanent, was leading. Ohanian treated that contrast as a warning about the difficulty of raising taxes on the wealthy, even as voters supported a tax increase affecting high earners.

Proposition 40 was trailing 56% to 44% in the returns Whalen discussed. He said advertisements against it were still running on election night. Ohanian estimated that the opposition may have spent half a billion dollars, while noting that he had not seen the latest figures. Whalen reported estimates ranging from $400 million to $600 million against the measure and said the supporting campaign had about $80 million. He questioned how that money had been spent, saying he had not seen comparable television advertising in favor of the proposal.

Ohanian argued that the opposition campaign had exploited a possible interpretation of Proposition 40 under which people who were not billionaires might face wealth or property taxes. He stressed that this was a possibility, not a certainty, but said the campaign had used it. In his view, the spending and organization behind the opposition showed how much it could take to defeat a tax increase in California.

Proposition 3 was leading with 58% support in the returns Whalen cited. It would make permanent a temporary surcharge on the state’s highest earners, first approved in 2012 and extended in 2016. Whalen said it preserved a higher bracket on the top 2% of earners and generated roughly $6 billion a year. He argued that losing that revenue would force the state to find equivalent savings or new revenue.

The measure’s history sharpened the dispute over what California should do with tax revenue. Ohanian put Jerry Brown’s final budget at roughly $201 billion and Gavin Newsom’s final budget at about $353 billion, a nominal increase of around 75% over eight years. Whalen noted that the increase was closer to 40% after inflation, a distinction Ohanian accepted. Their disagreement was less about the scale of the increase than about what the state had done with the money and the consequences of making the surcharge permanent.

Ohanian recalled Brown’s appeal for temporary taxes after the financial-sector crisis. Brown had urged voters to approve seven years of extra revenue, pay down debt and build reserves for leaner times. Ohanian argued that a tax introduced as temporary and tied to education had instead become permanent. He warned that higher top rates could encourage high earners to establish residency elsewhere, taking tax revenue and, in his view, entrepreneurial activity, ideas and potential job creation with them. He cited California’s 13.3% top income-tax rate, which he said could reach 14.6%, and named technology founders and investors as examples of people whose presence he believed the state needed.

Ohanian also said California had lost about 280,000 private-sector jobs since just before COVID. He regarded the permanent surcharge as a further risk to employment and economic activity. Whalen, meanwhile, criticized a Proposition 3 advertisement that connected Donald Trump’s attitude toward children to the case for the tax increase, arguing that Trump had no direct connection to the state measure.

The speakers described Proposition 41 differently, and the distinction matters to how they interpreted the returns. Whalen characterized it as a proposal that new state taxes not be excluded from state spending. Ohanian described it instead as requiring audits of potential new taxes and existing programs, which he saw as a way to increase transparency and accountability. They did not reconcile those accounts. Whalen noted that the measure was trailing; Ohanian’s criticism was that voters were rejecting a proposal he considered useful for accountability.

Ohanian described Proposition 42 as preventing retroactive property taxes and called that a good idea. He also argued that ads opposing Proposition 40 had presented Proposition 42 as protecting retirement accounts, warning that voters’ IRAs and 401(k)s were at risk. In his view, voters who supported taxing high earners and wealthier households might not have understood what they were voting on in Proposition 42.

Other measures illustrated the competing signals Whalen saw in the ballot. Proposition 37, a program to assist with down payments on certain new homes or converted nonresidential properties, was leading with about 61% support in the returns he cited. Supporters presented it as a boost to homebuilding. Proposition 45, which would have set deadlines for environmental reviews and lawsuits under the California Environmental Quality Act, was trailing. Whalen argued that the results could work against each other: voters were supporting a measure intended to encourage construction while rejecting one he believed could make building easier.

Becerra said he was considering declaring a state of emergency on housing. Whalen asked what such a declaration would mean, given Newsom’s earlier promise of a “Marshall Plan” and the gap between the state’s ambitions and construction. Whalen put Newsom’s target at 3.5 million new units and said the state had built slightly fewer than 700,000.

Ohanian argued that Sacramento’s housing remedies had not addressed the cost of building. He said building permits had barely changed over the preceding eight years and that roughly 200 housing laws had passed since 2016 without moving the needle. In his account, policy had focused on adding dense housing in places that were already dense and expensive, where land and construction costs were high.

As an example, Ohanian cited a proposed 190-unit apartment complex in Reseda that he said could cost about $800 per square foot. He argued that this was incompatible with the promise of affordable housing: California could not house everyone who wanted to live in the state at that price.

His alternative was to concentrate more construction in less expensive places, including the Central Valley, and make wider use of manufactured, modular and prefabricated homes. Ohanian said those technologies could offer lower-cost construction, but Sacramento had not focused on them. He attributed the failure to the influence of interest groups, including environmental organizations and construction interests.

Without a shift in where California builds and how homes are produced, Ohanian argued, the housing crisis would continue. His criticism was not simply that the state needed more units, but that the approaches it had pursued had not changed the costs that, in his view, constrain what can be built.

The Los Angeles mayoral race remained unresolved when Whalen and Ohanian discussed it. With about 740,000 votes counted, Nithya Raman was ahead of incumbent Karen Bass by roughly 17,000. Whalen estimated that another 200,000 to 250,000 votes might remain. The result was still uncertain; the challenges facing the eventual winner were not.

Ohanian described the mayoralty as a difficult job with limited authority and a large set of problems. He said some wealthy Democrats in Los Angeles were angered by Bass’s response to the Pacific Palisades fire, which he characterized as a major policy failure. He also said Bass had made measurable progress on homelessness, particularly around Skid Row, while emphasizing that the problem remained severe. He estimated the area of devastation around Skid Row at about 80 blocks.

Raman’s challenge, Ohanian said, had been unexpected. He noted that she had not carried her own district in the primary, which he took as a sign that she lacked strong support among voters who knew her best. He also anticipated that the City Council might include four or five Democratic Socialists, whom he believed would not bring sound economic judgment. A mayor, in his view, would have to work with a council that could be difficult to govern alongside.

Whalen identified three tests for the next mayor: homelessness, the decline of the entertainment industry and preparation for the 2028 Summer Olympics. Ohanian agreed that all three were substantial, and singled out the Olympics as a particular worry. He said the local organizing committee had become less transparent about progress on venues, which he suspected reflected delays. Los Angeles would need funding from Sacramento or Washington, and the project budget was already under strain.

He also raised questions about the people mover at LAX, which he said had been presented as an engineering achievement but had become a billion-dollar project whose readiness remained uncertain. For Ohanian, the Olympic commitments created a potentially large downside if outside funding failed to arrive or costs rose sharply. He said he had raised that risk with a group advising the state Legislature on the economics of the Games.

Ohanian argued that neither mayoral candidate had the experience to manage an enterprise the size of Los Angeles or meet the demands of the Olympics and homelessness. He pointed to Rick Caruso, who had run against Bass in 2022, as someone who might have been better equipped, and speculated that Caruso chose not to run because the job was unattractive. Whalen countered that the city could turn to a Democratic Congress, where California Democrats would have substantial influence, and to Becerra in Sacramento for support.

High-speed rail was another major responsibility Becerra would inherit. Whalen said some estimates put the project’s funding need at least at $110 billion, with higher estimates running tens of billions more. He also said it could run out of money by the end of 2027. Becerra had called for the project’s CEO to step down, and the CEO subsequently did, but Whalen saw no evidence that this resolved the funding problem.

Ohanian said Becerra had offered no detailed plan beyond a promise to complete the project on time and on budget. He pointed to seismic and geotechnical problems and environmental reviews as obstacles. He estimated that hundreds of thousands of pages of reviews had cost roughly $600 million.

The original proposition, Ohanian said, had been approved in 2008 with a $10 billion bond and a projected $33 billion cost for a San Francisco–Los Angeles line. It was supposed to have been completed six years before the discussion. He argued that the conditions used to justify the project had changed: California’s population would not reach the projections advocates had expected, and airport capacity would be less constrained than anticipated. He also said a flight between Los Angeles and San Francisco could be found for $29 or $39 one way if travelers chose the time and day.

Ohanian called the project a mistake and criticized Newsom for not ending it in 2019, when the governor questioned the existing plan before pivoting to a Central Valley route from Bakersfield to Merced. Ohanian put the cost of that segment at $35 billion to $36 billion and said it lacked public demand. He did not know where Becerra would find the money, particularly with other demands on the state budget, including health-care spending.

Whalen worried that Becerra might repeat Newsom’s earlier cycle: signal doubts about the plan, face pressure, then recommit without resolving how to pay. For both speakers, the immediate question was not only whether to continue the project, but what the state could fund alongside it.

On the Wednesday after Election Day, Whalen said an estimated 5.3 million votes remained to be counted in the governor’s race—about 40% of the ballots. He argued that California should not take weeks to settle results.

Ohanian agreed and pointed to mail voting as part of the problem. He proposed requiring ballots to be mailed one or two weeks before Election Day. Whalen went further, arguing that universal mail ballots had been adopted for a specific reason during the COVID pandemic and that the justification had passed. He suggested making Election Day a federal holiday and requiring in-person voting, with absentee ballots reserved for people who were ill or out of the country.

Both men presented in-person voting as a civic practice as well as an administrative choice. Whalen said voting together might strengthen a sense of community rather than dispersing the experience across several weeks. Ohanian recalled Los Angeles elections with turnout of 70% to 75% about 20 years earlier, when people voted at polling places, and saw no reason that level could not return.

They agreed the count was too slow. Ohanian, however, called a return to in-person voting a political nonstarter under the state’s current leadership.