Senate to Consider Budget Plan That Includes Higher Taxes for Wealthy

SACRAMENTO -- Senate Budget Committee Chairman Steve Peace said that a budget package he expects the Senate to take up on Tuesday will feature a proposal to increase taxes on the wealthy instead of a plan by Gov. Gray Davis to raise vehicle license fees paid by motorists.

The El Cajon Democrat released new details Sunday on the Senate plan as negotiations over a budget compromise between the Senate and the Assembly remained stalled because of a standoff in the lower house over education funding.

Peace said he might call a meeting today of the budget conference committee, but that, barring a resolution of the Assembly dispute, he would proceed with his plan to put a budget up for a vote in the Senate. The deadline for a budget to be in place for the start of the new fiscal year is July 1.

Peace said he planned to present Senate lawmakers with both a budget bill and a separate bill containing a variety of tax hikes and spending restorations. He said the tax proposals would include a plan by Senate Leader John Burton (D-San Francisco) to increase income taxes on wealthy Californians to raise $2.7 billion.

Also contained in the Senate plan is a suspension of a solar tax credit and a tax hike on cigarettes--both of which were previously floated by the Davis administration.

Davis opposes Burton’s income tax plan. When he released his revised budget in May, the governor noted that the state already suffers from a disproportionate dependence on high-end taxpayers to fill state coffers. Wild swings in their earnings from stock options and capital gains have contributed to a dramatic dip in tax revenue collected by the state.

Davis favors raising $1.3 billion in the next fiscal year by essentially doubling the vehicle license fees paid by motorists.

“The governor has not changed his position,” the governor’s spokeswoman, Hilary McLean, said Sunday. “He is still in favor of his proposal, which is balanced and responsible.”

Democratic lawmakers, according to Peace, favor the Burton proposal. Raising vehicle license fees is viewed as regressive by many Democrats.

In addition to abandoning the Davis license fee proposal, the Senate plan also does not suspend a tax credit bestowed on teachers--a suspension the budget conference committee had previously approved.

The Senate plan mirrors the committee’s work by including money to expand a health insurance program for poor children to cover their parents and to backfill money paid by cities to counties for booking suspects into county jail.

It also includes additional funding for firefighting and restores money for a tax program favored by environmentalists and farmers that rewards landowners for keeping their parcels undeveloped.

One feature of the Senate plan that could cause concern among school officials is a proposal to delay about $400 million in education funding in excess of what is required by state law until the 2003-04 budget year.