Democratic leaders in the state Assembly, frustrated by the refusal of Republicans to support tax hikes to help balance the state budget, pushed through a proposal Sunday night that uses a series of legal maneuvers to put higher levies in place without any GOP votes.
Gov. Arnold Schwarzenegger has vowed to veto any budget package that includes tax increases, and he vetoed a budget last winter that contained a similar tax ploy.
The move, coming as the state is days away from having to issue IOUs instead of paying its bills, is unlikely to do much to break the legislative logjam.
The plan, approved in a rare Sunday night session, would balance the budget with the help of more than $2 billion in new taxes on smokers, oil companies, drivers and homeowners. State Senate leaders said they would take up the bill today.
Included in the package are a tax increase of $1.50 per pack of cigarettes, a 9.9% extraction tax on oil companies, a $15 vehicle license fee surcharge to fund state parks and a charge on homeowner insurance premiums to pay for emergency response systems.
Assembly Speaker Karen Bass (D-Los Angeles) said her caucus would push the package through to make the point that it is prepared to take action to close California’s $24-billion deficit. The tax hikes account for a small share of revisions being considered late Sunday that included cuts in schools, healthcare programs and other government services as well as billions of dollars in deferrals and other accounting shifts that push state expenses into future years.
“We just feel that it is very important that we act with or without [a budget] agreement,” she said.
While the plan was debated on the floor, Bass was negotiating with the governor on an alternative.
The leader of the Assembly’s minority Republicans, Sam Blakeslee of San Luis Obispo, said the proposal is illegal and Democrats would set back budget negotiations by passing it.
“It makes moving forward in a cooperative way more difficult when these types of drills are undertaken,” he said.
Republicans are normally able to block tax increases despite being the minority party in both houses, because California is one of three states that require a two-thirds vote for budgets and tax hikes. Achieving that threshold requires some Republican votes.
The Democratic plan essentially swaps taxes and fees, employing an arcane loophole in state law that lets legislators pass a tax bill with a majority vote under certain conditions.