$8 Billion in Cuts, $8 Billion in Taxes Up For a Vote

November 25, 2008 · Posted By John Myers · Filed Under CA Budget 

One of two things will happen as the Legislature convenes today to consider solutions to the state's big budget mess: either a handful of Republicans will cross party lines and do something they've never done before... or we'll be right back at square one tomorrow morning.

That's the overview, in a nutshell, of what to watch for as Democrats in the Assembly and Senate put up a $17.1 billion proposal to deal with the budget gap now projected over the next 18 months.

The proposal, outlined for reporters in a background briefing with Democratic budget staffers, is split down the middle between cuts and taxes. The $8 billion in cuts relies on a $4 billion whack to proposed K-12 education spending, and a number of cuts to higher education, social services, transportation, and state employees.

The $8 billion in new revenues relies in a full restoration of the vehicle license fee (VLF), the infamous "car tax" of yore, and a suspension of this year's scheduled indexing of personal income tax rates; the latter means that most taxpayers would not see the lower state income tax rate they're scheduled to get when filing for 2008 (is that a tax increase, or the cancellation of a tax cut? Ah, semantics). For people whose adjusted gross income (AGI) is $50,000 a year, the reported cost is about $79, rising to $200 for those whose AGI is $100,000 a year.

The vehicle license fee hike, a tripling of the current rate from .65% of a vehicle's value to 2% (which is where it stood until 1998), would reportedly bring in about $5.7 billion over the 18 month budget period. The income tax indexing plan would bring in about $2.4 billion.

None of these proposals are new. Many of the cuts are smiliar in dollar amounts to those proposed by Governor Schwarzenegger earlier this month. The VLF is a perennial favorite when it comes to revenues. Even the income tax indexing idea, or at least a version of it, was pitched by Democrats this past summer during budget negotiations.

And the "usual suspects" nature of the plan brings us back to the first paragraph above; something truly unseen in recent years -- Republicans bucking their party leadership for one reason or another -- will have to happen if we're not going to all be right back here tomorrow... or next week... or in January.

If that wasn't depressing enough, then here's one more body blow: approval of this package would still leave the state budget in a big hole... another $10 billion over the next 18 months.


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