Calif. changing gas taxes to close budget deficit

By JUDY LIN, Associated Press Writer
March 4, 2010 at 11:35 a.m.

SACRAMENTO, Calif. — California lawmakers on Thursday began passing a complicated change to the gasoline tax to address part of the state's $20 billion budget deficit.

The state Senate passed the Democratic package on a majority vote, largely along partisan lines. The Assembly was scheduled to consider it later Thursday.

The legislation is modeled after Gov. Arnold Schwarzenegger's proposal to replace the sales tax on gasoline with a larger excise tax. The swap allows some accounting maneuvers that funnel more money into the state's general fund, where the deficit exists.

The tax exchange is estimated to generate $1.1 billion for the general fund while continuing to provide about the same level of funding for public transit and repairs to highways and streets.

Californians would see no difference in prices at the pump.

Republicans opposed the swap, characterizing it as a bait-and-switch for Californians that eventually would result in higher taxes at the pump.

The sales tax is a percentage, so it fluctuates with the price of gas, but because the excise tax is a flat amount per gallon, drivers might not see as much savings when the cost of gas declines.

Senate Minority Leader Dennis Hollingsworth, R-Murrieta, said the original plan offered by the Schwarzenegger administration proposed lowering overall gasoline taxes by about 5 cents per gallon. The Democrats' legislation, however, keeps overall taxes the same while applying more of the revenue to the general fund.

Hollingsworth said the legislation circumvents California's two-thirds requirement for passing tax increases. He described the maneuver as a lowering of one tax while raising fees to cover the difference, then redirecting the revenue.

Senate President Pro Tem Darrell Steinberg said the exchange from a sales tax to an excise tax did not require a two-thirds vote because it replaces taxes "dollar for dollar." He said it also maintains funding for transportation projects, which he said could create 10,000 jobs.

The Senate also passed remaining parts of a Democratic package to address the current-year cash shortfall.

http://www.signonsandiego.com/news/2010 ... t-deficit/