Tuesday, December 23, 2008

CA Tax Hike Passes Through Loophole

From the Washington Times:

California Republicans and taxpayer groups are vowing to go to court and initiate a referendum to halt nearly $10 billion in tax increases Democrats passed in a special session Thursday night.

In an extraordinary parliamentary maneuver, California Democrats circumvented a constitutional provision requiring a two-thirds vote in the state legislature to raise taxes by using their simple majority.

In 1978, California voters passed Proposition 13, which requires a two-thirds vote in the Assembly and the Senate to raise taxes. Until Thursday, the state legislature never raised taxes without reaching that threshold.

Even though Democrats enjoy large majorities in both bodies, a united Democratic front would still need the votes of three Republicans in each chamber to reach a two-thirds majority. Republicans in the legislature, who offered a budget plan that would have reduced state spending by $22 billion, were united in their opposition to any tax increases.

The Democratic plan attempts to exploit an arcane loophole that permits the legislature to pass a tax bill with a simple majority vote if the measure does not raise more tax revenue.

The gambit involved several steps.

First, the Democratic bill would eliminate some current fees, such as those applying to gasoline. Then it would impose several tax increases, including a 0.75-percentage-point increase in the state sales tax, a 9.9 percent tax on oil production and a 2.5 percent surcharge that taxpayers would owe on next year's state income taxes. Republicans have called the surtax "a tax on taxes."

The proposal would then re-impose gas fees at a much higher level and earmark the gas revenue for transportation projects.

State law permits the legislature to raise fees by a simple majority vote. However, the net effect would be an increase of $9.3 billion in state revenues.

Gov. Arnold Schwarzenegger, a Republican who advocated raising the state sales tax by 1.5 percent, has promised to veto the $18 billion budget package, which also included $7 billion in spending cuts that would affect schools, health care, grants to local governments and other programs.

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