Davis targets tax hikes to battle budget deficit | TahoeDailyTribune.com

Davis targets tax hikes to battle budget deficit

California shoppers, smokers and the wealthy are lined up to receive the midyear pain of an almost $35 billion budget shortfall, Gov. Gray Davis announced Friday.

Tax increases aimed at the three subset populations are expected to raise $8.2 billion. The governor has proposed raising the sales tax by 1 cent, an action that may cost the typical family about $200 to $250 a year.

Davis added that he struggled with increasing a tax that may quell consumer spending, but he emphasized there are more advantages than disadvantages to the tax.

“Local governments will benefit from increased taxes these people will pay,” Davis said in a press conference Friday afternoon.

The revenue would be funneled to city and county governments, so they’re able to run state health and welfare services.

The governor has also called for increased income taxes for the state’s top earners — those raking in $260,000 a year, plus –as well as a $1.10-per-pack cigarette tax hike.

While higher taxes are proposed, the plan will leave the vehicle license fees alone. He shied from the prospect of using these fees because the law dictates the state can’t force the counties to use them to support state programs, and that’s what he needs the local jurisdictions to do.

“That was our first instinct — to look at that revenue source,” Davis told the Tahoe Daily Tribune. “The bottom line is, when people pay the (fees), they won’t have to pay more.”

Beyond tax hikes, Davis also calls for $20.7 billion in budget cuts this year and the next — including $4.5 billion in education.

“Nearly every program gets cut in this budget,” Davis said. “None of this was going to be easy. But my first fiduciary responsibility is to balance the budget. There are a lot of good ideas — some I like better than others.”

The governor also plans to reduce 1,900 positions, with the majority already filled by workers. The move follows the elimination of 10,000 jobs over the last two years.

The budget shortfall has been blamed on a variety of colliding misfortunes, from high medical insurance costs to state investments in a flailing stock market.

The state’s general fund has declined for the third consecutive year, a first since World War II.

With the state legislative analyst reporting $13 billion less of a shortfall, critics claim the deficit was inflated to justify tax increases.

“No one on this planet wants this shortfall to be lower than me,” Davis said.

— Susan Wood can be reached at (530) 542-8009 or via e-mail at swood@tahoedailytribune.com

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