You are quite right that a tax-raising Arnold is no boon to the California GOP. This is one of Tom McClintock’s talking points: it takes a Republican to raise taxes in California (see my piece it the next NRODT on this–the last two big tax increases came from Pete Wilson, and, alas, Ronald Reagan). If Davis survives or is replaced by Bustamante, Republicans will be in a better position to block a tax increase, as they did this year.
The real hazard is that Bustamante might win, and then get to run for election as an incumbent in three years, whereas Davis will be termed out if he survives. If the economy starts to turn around by then, who knows? Bustamante might look okay to enough voters to sneak back into office. At that point, the recall will look like a bad bet.
McClintock, a good friend (I have sent money to his campaign), is in a tough spot. If he stays in, he will be accused of costing the party a victory if Arnold loses narrowly. But if Arnold wins without him and raises taxes, then Tom can say “I told you so,” which is not much consolation, and it will be hard to challenge Arnold in the GOP primaries in 2006 because the state party establishment sees hope that they can rebuild the party around Arnold’s celebrity.