Majority Democrats, thwarted in their various attempts to close a $40 billion budget hole by tax-hating Republicans, unveiled a legally questionable plan this afternoon that they contend will close the deficit by $18 billion and not require a single GOP vote.
The plan is convoluted and complicated but completely vetted and approved by legislative counsel, the Democrats said. It goes something like this: The state would drop its excise and sales taxes — totaling about 26 cents a gallon — on gasoline. But a new gas “fee” of 39 cents a gallon would be enacted. That “fee” would pay for transportation projects, and since it’s not a tax, it only needs approval from a simply majority of lawmakers, Democrats say.
But wait! There’s more.
The budget bill would replace the existing gas tax with 1) a half-cent tax increase on all sales as of February; 2) an oil extraction tax; and 3) a 2.5 percent surcharge on your income tax bill starting in 2009. Those tax hikes don’t need two-thirds approval because they simply replace the existing gas taxes, Democrats again contend.
But we’re not done yet! The proposal would end a money-shifting scheme created several years ago and raise local-level sales taxes by a quarter-cent. Oh, and if you’re an independent contractor, you’ll be asked to withhold 3 percent of your income for tax payments.
So to boil it all down, your cost at the pump will go up 13 cents a gallon, your sales tax rate will jump three-quarters of a cent, and you’ll pay $25 a year more on a $1,000 income tax bill if the Democrats pass and the governor signs this package into law. Of course, it will have to survive what will surely be an onslaught of legal challenges.
Senate President Pro Tem Darrell Steinberg said he’s not worried.
“We have this vetted by a very conservative legislative counsel who is very reluctant to deviate from the two-thirds vote requirement,” Steinberg said.
We haven’t heard from legislative Republicans or taxpayer groups yet, but we’re pretty sure they don’t share that legal confidence. And we’re still waiting for the Democrats to provide copies of their legal opinion.
Democrats said they had no choice but to get “creative” with the budget since Republicans have refused to go along with any tax-raising plan. Citing the impasse and a looming cash crisis, a state panel today froze funding for a host of publicly financed construction projects, including the new Santa Ana courthouse for the Fourth District Court of Appeal.
“There is an even greater responsibility than bipartisanship and that is to govern,” Steinberg said.
And if the current package of budget “fixes” isn’t enough for you, remember that, as Assembly Speaker Karen Bass said today, it’s only a “44 percent solution.” There will still be a $22 billion budget gap to fill starting in January.
— Pam Smith