Democrats Propose Tax Shifts To Avert Health Program Cuts
On Tuesday, Democratic lawmakers proposed a budget plan that aims to bypass major cuts to health programs and social services by changing how Californians are taxed, the Sacramento Bee reports.
Democrats say the plan â" created by Senate President Pro Tempore Darrell Steinberg (D-Sacramento) and Assembly Speaker John PÃ©rez (D-Los Angeles) â" would raise about $1.8 billion through June of next year. That is about one-tenth of the state's estimated $19 billion deficit.
California has been operating for more than a month without a budget in place.
The budget plan by Steinberg and PÃ©rez would:
- Retroactively increase the income tax in 2010 by one percentage point for all residents except those in the highest income bracket;
- Impose a tax increase of half of a percentage point on vehicles (Yamamura, Sacramento Bee, 8/4); and
- Decrease the state sales tax rate from 6% to 3.5% by next year (Buchanan, San Francisco Chronicle, 8/4).
The plan also includes an oil severance tax and a delay in corporate tax breaks (Christie/Russ, Reuters, 8/3).
Democrats say their budget plan would lower the overall tax burdens for Californians because of the sales tax decrease and because residents could deduct the higher state taxes from their federal tax returns.
Gov. Arnold Schwarzenegger's (R) office said the Democrats' proposal would be "dead on arrival." The governor's Department of Finance estimates that the Democrats' plan would result in higher taxes for 57% of taxpayers.
Many Republicans have expressed support for the budget plan that Schwarzenegger released in May. The governor's proposal would:
- Scale back in-home care services for low-income disabled residents;
- Raise rates for beneficiaries of Medi-Cal, California's Medicaid program; and
- Eliminate the state's welfare-to-work program (Sacramento Bee, 8/4).
Senate Minority Leader Dennis Hollingsworth (R- Murrieta) said Republicans are not eager about the governor's deep cuts to social services but see the spending reductions as necessary to balancing the budget (San Francisco Chronicle, 8/4).
Steinberg and PÃ©rez said the governor's budget proposal would lead to 430,000 people losing their jobs in health care, child care and other sectors (Reuters, 8/3).
Budget Clock Keeps Ticking
On Tuesday, Controller John Chiang (D) warned that if the budget battle continues, the state will run out of cash in September, and he would need to start issuing IOUs (San Francisco Chronicle, 8/4).
Two-thirds of the California Legislature must approve the budget and any tax increases (Marois, Bloomberg, 8/3).Â
Whether or not people agree with the Democrats' budget plan, it should be applauded because it shows that legislators are trying to break the budget stalemate, a Sacramento Bee editorial states. It adds, "What's missing is a governor willing to apply pressure to all sides" (Sacramento Bee, 8/4).
On Tuesday, Capital Public Radio's "KXJZ News" reported on the Democrats' budget proposal. The segment includes comments from:
- PÃ©rez; and
- Hollingsworth (Russ, "KXJZ News," Capital Public Radio, 8/3).