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Posted on 01/10/2003 1:49:01 PM PST by Ernest_at_the_Beach
Governor to propose higher income, sales rates to help raise $8.3 billion
SACRAMENTO -- Though Gov. Gray Davis spent the week touting his modest economic-stimulus plan to create jobs, today he will propose tax hikes for a realignment of services and huge spending cuts that critics say will be massive job killers.
Davis will propose $8.3 billion in new taxes, including raising the income tax rate on the wealthiest Californians and boosting the sales tax by 1 cent, administration officials familiar with the budget said Thursday.
The taxes would be used to pay for $8.2 billion in state services the governor will ask the Legislature to shift to local governments as California confronts what Davis describes as a $34.8 billion budget gap during the next 18 months, the officials said.
In addition to the increased sales and income taxes, Davis wants to add an additional $1.10 in taxes on each pack of cigarettes and raise assorted fees. Unlike last year, the governor will not propose raising vehicle license fees or increasing taxes on alcohol -- recommendations ultimately rejected by the Legislature.
The governor's proposed tax increases would account for 23 percent of the amount needed to bridge the projected budget shortfall over the next 18 months, officials said. The sales tax increase alone would generate an estimated $4.6 billion annually, while raising the income tax rate on California's wealthiest residents would generate another $2.6 billion and the cigarette tax will bring in another $1.2 billion, the officials said.
The governor's proposal reinstates two top rates in the California income tax. Individuals would pay 10 percent on any income in excess of $136,115, and couples on income above $272,230. The 11 percent bracket would kick in for individuals earning in excess of $272,232, and for couples with annual income of $544,464 or more. Currently, the state's top income tax rate is 9.3 percent.
Republican legislators said the irony of Davis promoting a job creation plan while pitching job-cutting tax hikes deepens if you take into account what they view as the Democratic governor's four-year history of signing job-killing legislation -- assertions dismissed by Davis.
GOP lawmakers, in particular, attacked the aspect of Davis' widely anticipated tax-hike plan that would make a 1-cent boost in the sales tax, which averages about 8 percent statewide.
A penny per dollar increase in the sales tax would cost the typical family about $200 to $250 a year and translates to $150 more in sales tax on a $15,000 car.
Republicans said they expected Davis, in a move meant to make the plan more appealing to the GOP, to put the $4.5 billion it would generate toward financing the shift of health and social programs from the state to counties.
The realignment, the Davis administration official said, would involve the "mental health, children and youth, healthy communities, long-term care and court security" programs.
"These were really difficult programs to cut and since they're all handled by the county, it seems more effective to give them the revenue to do it, which will save everybody money in the long run," said the official.
But Republican lawmakers are not warming to Davis' tax-hike plans.
"The governor needs to understand that raising taxes will send even more jobs out of California," said Assembly Republican Leader Dave Cox of Sacramento. "Tax increases don't create jobs, get people back to work or stabilize our economy."
The governor already has pitched about $10 billion in midyear cuts that hit education, health and social programs, transportation and other sectors.
At the same time, Davis has proposed an economic-stimulus plan, centered around creation of 500,000 jobs over four years, that has drawn little enthusiasm. It involves modest steps such as accelerating school, road and housing construction using bond money.
The Legislature, set to begin debating his budget plan, is dominated by Davis' fellow Democrats who want to hike taxes in order to blunt spending cuts. But they need a handful of votes from Republicans, who are opposed to tax increases.
In arguing against tax hikes, Republicans pointed to a new study on increases in sales tax and other levies, conducted by the National Taxpayers Union Foundation.
"A review of the last state budget crisis clearly shows that resorting to tax hikes will slow economic recovery and prolong the budget agonies that many states are experiencing," said foundation president John Berthoud.
A sales tax increase of 1 cent would be atop the existing amount that varies county by county.
Government imposes a basic, combined state and local sales tax of 7.25 percent on most retail transactions, such as purchase of clothing, household goods and cars. Items such as food for home consumption are exempted in an attempt to make the tax affect the rich more than the poor.
Local elected officials in many counties and a few cities, with the approval of voters, have boosted the sales tax in small, varying increments to an average of about 9 percent statewide.
The Bay Area rates are currently 8.5 percent in San Francisco, 8.25 percent in Alameda, Contra Costa, San Mateo and Santa Clara counties; 7.75 percent in Napa and San Joaquin; 7.5 percent in Sonoma; 7.375 percent in Solano; and 7.25 percent in Marin.
In a related development, Republican lawmakers introduced a measure that could become a bargaining chip in the political contest over the budget. Democratic votes would be needed to put the proposed constitutional amendment on the ballot limiting the growth in state spending to the state's growth in population and inflation.
Assemblyman John Campbell, an Irvine Republican who authored the measure, is among those who has blamed current woes partially on overspending by Democrats.
Wire services contributed to this report
Contact Steve Geissinger at sgeissinger@angnewspapers.com .
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And that extra one percent will be known in perpetuity as "The Davis Tax."
The typical family in California only spends $20,000 to $25,000 a year on taxable items?
The rest of it is a house payment.
Now all the morons who voted for him will get what they deserve.
Thanks bud, but he's already done it. There is a 3% sales tax going in on the sale of a residence as of the first of this year. Do you think it's enough?
For the children, Californians should pay sales tax on their total mortgage payments, don't you think?
I have been looking thru some of my Grocery receipts. No sales tax on most of the food stuff, but I find a sales tax on vitamins, ibuprofen,(Headache caused by Davis), magazines, cards, but no tax on milk, bananas, bread etc!
I don't see how they arrived at the numbers!
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