Around dawn this morning, California approved its budget. Locked down until one more vote could be found to support the compromise package, and facing the suspension of construction projects today unless cash was found, it finally happened when Sen. Abel Maldonado (pictured right) joined two other Republicans in casting his vote in support. Maldonado had been one of several senators targeted for a potential switch; the sticking point with him was his list of demands in return for his vote:
- Drop the gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. increase part of the proposal
- Suspends pay for legislators when they miss the budget deadline (this demand was rejected)
- Freeze pay raises for legislators when the budget is not balanced
- (Most controversially,) submission of a “top two” primary system for public vote, whereby all candidates run in a primary race and only the top two votegetters go on to the November ballot. Such a system has the pro of empowering moderate candidates that can draw from primary voters of all parties, but has the con of shutting out smaller parties statewide and even a major party in a district that is sufficiently gerrymandered.
Also changed was the income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. proposal, which transformed from an across the board 2.5% increase to an increase in each bracket by 0.25%, raising a further $400 million over two years. When confronted with the package, legislators initially rejected the open primary provision and, after a Democratic caucus meeting, approved it. The budget was then approved and everyone went home. Several provisions of the package require a public vote, which will be on May 19, 2009.
The vote of another Republican, Sen. Roy Ashburn, was secured with good-old tax credits and subsidies for favored industries:
For Ashburn’s support, legislative leaders included an amendment he backs that provides a $10,000 tax credit for those who buy new homes. The credit, supported by home builders, would be available starting in March and run through 2010. It would be capped at $100 million.
Californians would be able to use the credit to offset their state income taxes over three years.
Lawmakers also agreed to help the horse racing industry in his district — and throughout the state — by using $32 million in state funding each year to offset maintenance fees at fairgrounds.
And hugs from Democratic lawmakers:
After his speech, Democratic senators came over and hugged Ashburn, who had negotiated $100 million in tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s to help home builders and tax breaks for horse-racing tracks.
I’d like to know how they plan on capping a tax credit—first come, first serve? Aside for $14.8 billion in cuts to projected spending over two years and $5.4 billion in additional borrowing, here are the tax changes:
|
Personal Income Tax |
|||
|
Income Levels |
Current Rate |
New Rate |
Rate if Enough Federal Stimulus Money is Received |
|
>$0 |
1% |
1.25% |
1.125% |
|
>$7,168 |
2% |
2.25% |
2.125% |
|
>$16,994 |
4% |
4.25% |
4.125% |
|
>$26,821 |
6% |
6.25% |
6.125% |
|
>$37,233 |
8% |
8.25% |
8.125% |
|
>$47,055 |
9.3% |
9.55% |
9.425% |
|
>$1,000,000 |
10.3% |
10.55% |
10.425% |
|
Sales Tax (state and key cities) |
||
|
City |
Current Rate |
New Rate |
|
(State Base) |
7.25% |
8.25% |
|
Los Angeles |
8.75% |
9.75% |
|
San Diego |
7.75% |
8.75% |
|
San Jose |
8.25% |
9.25% |
|
San Francisco |
8.50% |
9.50% |
|
Long Beach |
8.25% |
9.25% |
|
Fresno |
7.975% |
8.975% |
|
Sacramento |
7.75% |
8.75% |
|
Oakland |
8.75% |
9.75% |
|
Santa Ana |
7.75% |
8.75% |
|
Anaheim |
7.75% |
8.75% |
|
Bakersfield |
7.25% |
8.25% |
|
Riverside |
7.75% |
8.75% |
|
South Gate |
9.75% |
10.75% |
|
Vehicle License Tax |
Current Rate |
New Rate |
|
Statewide |
0.65% |
1.15% |
|
Gasoline Tax |
Current Rate |
New Rate |
|
Statewide |
18¢/gallon |
18¢/gallon |
California already had the sixth highest state-local tax burden in the country, as reported in our State-Local Tax Burdens report last summer.
More on California here.
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