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Governor Proposes Tax Increase, Budget Cuts

Sales tax could go up 1.5 percent, would apply to services, amusement parks.

Sponsored By:

The Brittany Foundation

Governor Arnold Schwarzenegger has announced his plan to
take drastic action – including raising sales tax by 1.5 percent – to shore up California’s
staggering budget shortfall, which has now reached $11.2 billion.

Legislators have been called back to Sacramento
for special sessions which will address his action plan to get the budget back
on track, invigorate the economy and generate jobs for the state’s unemployed.

“In the six weeks since I signed our last budget, the
mortgage crisis has deepened, unemployment has increased and the stock market
has lost almost 20 percent of its value,” Schwarzenegger said in a prepared
release. “We have drastic problems that require drastic and immediate action –
we must stop the bleeding right now.”

Image
Governor Arnold Schwarzenegger outlines his proposed plan to address California's financial crisis

 

Los Angeles County Supervisor Michael Antonovich weighed in
on the issue, calling Schwarzenegger’s proposals a step in the wrong direction.

“The State needs to focus on eliminating waste and duplication
– not raising taxes,” he said. “California
’s financial mess is a direct result of a bloated state
government and overspending.  Vital reforms need to include
implementing a two-year budget, a part-time legislature and an end to
introducing legislation which cost more than the funds that are provided to local
government.” 

The Governor is proposing $4.5 billion in cuts and $4.4
billion in new revenues for the current year budget, which will preserve vital
state services. He is also calling for a temporary increase in the state’s
sales tax from 5 percent to 6.5 percent (Los Angeles
County
taxes are currently 8.25
percent) which should generate $3.219 billion in sales tax revenue in 2008-2009
and $6.606 billion in 2009-2010. In 2011, the sales tax would revert back to 5
percent.

Sales tax would also be extended to services not previously
affected, such as appliance and furniture repair, vehicle repair, golf and
veterinarian services, effective Feb.
1, 2009
. In March, the tax would apply to amusement parks and
sporting events. Additionally, a five cent tax per drink would be added
starting Jan. 1, 2009.
Revenues would be used to fund drug and alcohol treatment and prevention
services. Alcohol taxes were last raised in 1991.

Among the $4.5 billion in cuts are Prop. 98 expenditure reductions
of $2.5 billion; $65.5 million in cuts for the University of California system
and $66.3 million to the California State University system; reducing
Supplemental Security Income/State Supplementary Payment grants to the federal
minimum; reducing CalWORKS grants by 10 percent effective March 1, 2009,
requiring state employees to take one furlough day each month, eliminating two
state holidays (Columbus Day and one of the days given for Lincoln and
Washington’s birthdays, combining the two into one Presidents Day holiday),
giving state agencies the authority to institute a 4/10 workweek (four days of
work at 10 hours a day); certain parole reforms and the reduction of Medi-Cal
benefits.

The Governor’s plan to stimulate employment includes
accelerating hospital construction, expediting infrastructure bond monies to
create jobs and help re-train residential construction workers, providing
overtime exemptions and allowing more flexible work schedules, clarifying meal
and break policies, reducing barriers to public-private partnerships to allow
for quicker, cheaper infrastructure construction, adding tax credits for film
and TV production to stop “runaway production.”

Additionally, the governor is proposing a plan to keep
families in their homes and head off foreclosure and providing incentives for
loan modifications, financed by a portion of the $700 billion Troubled Assets
Relief Program (aka bailout).