Legislative panel approves oil and tobacco taxes

The Democrat-dominated committee pulls back from some of the governor's proposed cuts. Its action sets up a showdown over the budget, as the Republican Schwarzenegger vows to veto any tax increases.

By Shane Goldmacher and Eric Bailey
June 17, 2009

Reporting from Sacramento -- Setting up a partisan showdown, a legislative budget panel approved plans today that would boost oil and tobacco taxes, slash money for schools and deport illegal immigrant prisoners. But it pulled back from some of the deepest cuts proposed by Gov. Arnold Schwarzenegger to tame California's $24.3-billion deficit.

The Democrat-dominated committee, working into the evening as California teeters on the brink of insolvency, also voted to raise community college fees and slice social services for the poor. But members declined to endorse many of Schwarzenegger's ideas, especially his plans to eliminate some programs altogether.

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By far the most contentious vote came over a Democrat-backed proposal to hike taxes on oil and tobacco.

The plan, approved on a straight party-line vote by the six Democrats on the 10-member budget committee, calls for a new 9.9% levy on oil pumped from California soil, which would produce about $830 million during the coming fiscal year. It would raise the state's cigarette tax by $1.50 a pack, raising $1 billion. And repeal of a corporate tax break approved just months ago would net $80 million.

The levies are anathema to GOP lawmakers and the Republican governor, who blasted the Democratic plan and vowed to veto it.

"This is probably the most massive and quickest tax increase ever . . . in the history of California -- it's almost breathtaking," said Assemblyman Jim Nielsen (R-Gerber), a committee member who voted against the taxes.

Lawmakers said they expect the full Legislature to vote on the committee's actions next week.


But with Wall Street considering yet another downgrade of California's credit and the Obama administration reiterating its refusal to provide special aid to the Golden State, lawmakers could not say how close they were to plugging the entire deficit.

shane.goldmacher

@latimes.com

eric.bailey@latimes.com

Times staff writers Michael Rothfeld and Seema Mehta contributed to this report.

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