Calif. GOP lawmakers kill Dem's $6.6B tax package

WEST SACRAMENTO — California's Republican lawmakers on Sunday rejected a Democratic proposal for $6.6 billion in tax increases on the wealthy and corporations despite an offer to boost the state's rainy day fund. The failed vote now pushes California's budget impasse into its eighth week with no compromise in sight.

The 45-30 vote in the state Assembly was the first since the state began its new fiscal year July 1 without a budget. It came after four hours of debate during which 49 of the Assembly's 80 members spoke.

Democrats offered a revised tax plan that's smaller than the $8.2 billion package they initially proposed last month. Under the new proposal, Democrats called for imposing top income tax brackets of 10 percent on joint filers making more than $321,000 per year, and 11 percent on the portion above $642,000. The highest tax bracket is currently 9.3 percent.

The proposal also called for a temporary suspension on the net operating loss deduction allowed for businesses. And it reinstates a higher corporate tax rate.

Assembly Speaker Karen Bass, D-Los Angeles, characterized the package as a compromise because it contained both cuts and new revenues. She said her plan reinstates tax brackets that were last in place under former Gov. Pete Wilson, a Republican, in the 1990s.

The Democratic leader said the proposal included a constitutional amendment for increasing the state's existing rainy day fund from 5 to 10 percent of general fund revenues.

It also includes measures that would allow the state to borrow $10 billion from future lottery funds to generate more revenue. According to the Democrats' plan, lottery proceeds would go toward retiring debt and filling the rainy day fund beginning in the 2009-10 fiscal year.

GOP members, whose votes are needed for a two-thirds vote, said they refuse to burden people with taxes while the economy remains weak. California's unemployment rate is now 7.3 percent, the highest in 12 years.

It was unclear whether the state Senate planned to take up the Democratic plan.

Last week Republicans proposed a spending cap that would have restricted growth to population change and inflation. The plan was rejected by Democrats, who hold a majority in both houses.

Gov. Arnold Schwarzenegger has been unsuccessful in leading budget negotiations. Democrats recently backed off from a temporary 1 percent sales tax Schwarzenegger proposed.

Schwarzenegger has tried to add pressure to the talks by laying off more than 10,000 state workers and trying to roll back wages for about 175,000 other employees. Some would receive the federal minimum wage of $6.55 an hour under Schwarzenegger's order, which is being challenged by state Controller John Chiang.

California is the last state in the nation on a July fiscal calendar to enact a budget.

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Calif. GOP lawmakers kill Dem's $6.6B tax package

The New York Times

Mon Aug 18

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