State Democrats’ New Budget Plan Could Raise Personal Income Taxes
California Democrats plan to release a proposal to address the state's $19.1 billion budget deficit that could include a one percentage-point increase in the state's personal income tax rate, Bloomberg reports.
The state has been operating without a budget since the new fiscal year began on July 1.
Democrats' Tax Proposal
According to Senate President Pro Tempore Darrell Steinberg (D-Sacramento), the increase would affect all residents except those in the highest tax bracket.
Democrats say the move might appeal to voters because residents could deduct the higher state income tax from their federal tax returns. In addition, the proposal would reduce California's sales tax by 2.5 percentage points to help offset the income tax hike.
Steinberg said the strategy could increase the state's general fund by as much as $3 billion.
Aiming ToÂ Lessen Governor's Proposed Cuts
In May, Gov. Arnold Schwarzenegger (R) released a budget proposal that included $12.4 billion in spending reductions, including some cuts to various state health care programs.
Steinberg said Democrats might support half of the governor's proposed cuts if they could use the tax increases to balance the remaining budget gap.
However, Schwarzenegger spokesperson Aaron McLear said the governor likely would not support raising the income tax (Marois/Palmeri, Bloomberg, 7/30).
Governor Brightens Outlook
Earlier this week, Schwarzenegger said he might leave office before lawmakers develop a suitable budget.
However, the governor changed his tone on Thursday, saying he now is optimistic that the Legislature will create a budget he can accept. He said, "I think that in the end there will be a breakthrough and we'll get it done" (Hawkins, San Diego Union-Tribune, 7/29).
On Thursday, Capital Public Radio's "KXJZ News" reported on California's budget situation (Lieszkovszky, "KXJZ News," Capital Public Radio, 7/29).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.