[Susanleech]

Congrats to California on achieving success at last. Taxes are still much lower than Australia.

http://www.bloomberg.com/apps/news?p...._8&refer=home

California Republican Senator to Switch, Back New Tax

By William Selway

Feb. 19 (Bloomberg) -- A California Republican state senator broke ranks with the party and agreed to support tax increases to help close a record $42 billion budget shortfall, potentially ending a political deadlock that has gripped the Capitol for more than six days.

Abel Maldonado, a Santa Maria strawberry farmer who has indicated interest in running for statewide office, said today that he supports raising revenue as part of a Democratic-led plan to redraw the state’s budget. His vote would provide the additional one that was previously lacking in the Senate, causing it to fall short of the two-thirds majority needed for passage.

“This could be a career-ender for me,” he told reporters in the Senate chamber in Sacramento, where a vote is scheduled today. “In difficult times, you need to step up to the plate.”

The Republican’s support came amid nearly round-the-clock budget talks. More than a year of economic recession has hammered California’s tax collections, creating a gap in the budget that forced the state to shut down thousands of construction projects, delay payments of income tax refunds and left it with the lowest credit rating of any U.S. state.

Should the Senate approve the budget package, it would go to the Assembly for ratification and then to Governor Arnold Schwarzenegger for his signature. Democratic Senator Mark Leno, from San Francisco, predicted sufficient votes existed for passage. “We will get to the two-thirds,” he said in an interview.

Two-Thirds Supermajority

While Democrats control both chambers of the Legislature, taxes and budgets must be approved by a two-thirds supermajority equal to 27 of 40 seats in the Senate and 54 of 80 in the Assembly.

The tax increases, totaling as much as $13 billion through June 2010, are part of a budget package backed by Schwarzenegger a Republican and Democrats.

Citing politicians’ inaction, Standard & Poor’s on Feb. 2 cut the rating on $46 billion of California’s bonds to A from A+, giving it the lowest credit grade of any U.S. state. A California bond due in 2036 that pays 4.5 percent interest last traded for 82.8 cents on the dollar to yield 5.75 percent. On Feb. 13, that bond traded for an average 86 cents to yield 5.48 percent, according to Municipal Securities Rulemaking Board data. The higher yield indicates investors believe risk has increased.

Maldonado’s decision followed a tumultuous day of lobbying, as Schwarzenegger and Democrats sought to salvage the budget after Senate Republicans ousted their leader for endorsing the tax increase.

Government Overhaul

To secure Maldonado’s support, Democratic leaders decided to take up government overhaul measures he sought, including a plan to create open primaries where Republicans and Democrats are free to select in which party’s election they want to vote. It would also need to be approved by state voters.

The agreement brokered with Maldonado hit an early snag when the there was insufficient support to approve his constitutional amendment that would change how primary elections are held. Votes were taken on that measure in the middle of the night, ahead of the tax-increase plan.

The revenue proposal would raise the state sales-tax rate to 8.25 percent from 7.25 percent and boost vehicle license fees to 1.15 percent from 0.65 percent of the value of an automobile.

The package doesn’t include a gasoline tax increase, and it would cut a surcharge levied on paid income taxes, depending on how much California receives under the economic stimulus measure signed by President Barack Obama, according to an analysis distributed by Senate Democrats.

Scaling Back Operations

California’s government has slowly began to shut down as politicians debated for four months on how to cut spending or raise revenue to replace lost tax collections. This week, as no agreement was forthcoming, the state told some 20,000 workers that they may lose their jobs.

The tax increases drew fire from most Republicans, who said they would hurt residents who are already reeling from the worst recession since the 1930s.

“We need to stop treating the taxpayers of California as our personal ATM,” said Senator Tony Strickland, a Los Angeles- area Republican.

[Susanleech]

Congrats to California!

http://www.nytimes.com/2009/02/20/us...fornia.html?hp

In Budget Deal, California Shuts $41 Billion Gap

LOS ANGELES — Take-home pay for Californians is about to shrink. Jeans, hammers, burgers and fries will cost more. Public school children will make do with old textbooks and find more classmates sitting next to them. Parents will receive fewer tax benefits, and state university students will pay 9 percent more in tuition.
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As the sun rose in Sacramento on Thursday, state lawmakers ended months of political gridlock and agreed on a series of budget measures that included something for most everyone in California to despise. The $143 billion budget closes a $41 billion deficit through 2010 with tax increases, deep cuts in services and extensive borrowing.

Although California’s budget process is unusual and its fiscal problems outsized — the state’s deficit is larger than the expenditures of all but 10 other states — economists say this budget foreshadows the difficult choices that other state legislatures will soon face as the national economy worsens.

Republican lawmakers voted for tax increases at the possible expense of losing the next election; Democrats agreed to spending cuts unheard of in other downturns; and most everyone in Sacramento averted even greater compromises by looking to the federal stimulus money to bail them out.

California wrestled with its budget shortfall earlier than other states essentially because of a trick of timing. The state’s current budget was passed months late last fall and was immediately shot through with holes because of the economic downturn. In a lengthy emergency session that ended with the vote on Thursday, legislators closed the current gap as well as the projected gap for the next fiscal year.

Most other states are only beginning to address their shortfalls. But with 40 states operating in the red, similar days of reckoning will soon be coming to state capitals from Florida to Arizona, state budget officials say.

“California is an example of what you will see” across the country, said Susan Urahn, the managing director of the Pew Center on the States and a budget expert. The size of budget deficits in other states will lead to similarly hard-fought debates on how to close the gaps, Ms. Urahn said.

What is more, California might have set the template as other states ponder how to apply the more fungible outlays of the federal stimulus money. “My guess is states will use what they can to reduce cuts to the bone in education and health care,” Ms. Urahn said.

California’s budget agreement came after a record-long floor session of nearly 46 hours. Democrats, who control both houses of the Legislature, reluctantly agreed to a series of concessions to win the support of a single Republican senator, whose vote was necessary to reach the two-thirds majority required under state law for budget bills.

All 75 Democrats in the Legislature voted for the budget agreement, along with 6 of the 44 Republicans in the two houses. Gov. Arnold Schwarzenegger, a Republican, said he would sign the agreement on Friday.

The pact contains $14.8 billion in spending cuts, including to public transit, health care, schools and the courts; $12.5 billion in tax increases; $5.4 billion in new borrowing; and the creation of a $1 billion reserve fund.

Personal income tax rates will rise by one-quarter of a percent, and the state sales tax will climb by 1 percentage point, to 6 percent, though each county will have different rates and the average will be 8.9 percent. The state’s vehicle license fee — which Mr. Schwarzenegger abolished with great theatrics when he took office in 2003 — will nearly double, to 1.15 percent of the value of the vehicle.

Left on the cutting-room floor was a proposed 12-cent increase in the gasoline tax; lawmakers filled the gap instead with $600 million in cuts and an infusion of federal stimulus money.

According to the budget documents, if the state receives what it predicts from the federal stimulus package — more than $9 billion — there would be other benefits to the budget: borrowing would be reduced by roughly half, $950 million in cuts would be restored and the tax increases would be reduced.

After negotiating almost without sleep since Saturday, a deal was struck in the early hours on Thursday when Democratic lawmakers agreed to the lion’s share of the demands made by the holdout Republican, Abel Maldonado of Santa Maria, who wanted state constitutional amendments banning legislative pay increases during deficit years and creating more competitive elections by establishing open primaries.

It was a hard-fought but costly victory for Mr. Schwarzenegger, who became governor during another budget crisis in 2003 in part by vowing never to raise taxes. He will soon have the distinction of being the first California governor to sign off on a major tax increase since Pete Wilson, a Republican, negotiated a $7 billion broad-based increase in 1991.

Mr. Schwarzenegger rode into office as a reformer but has morphed into a centrist often at odds with his party.

[CIAFreeAgent]

Congrats to California on achieving success at last. Taxes are still much lower than Australia.

http://www.bloomberg.com/apps/news?p...._8&refer=home

California Republican Senator to Switch, Back New Tax

By William Selway

Feb. 19 (Bloomberg) -- A California Republican state senator broke ranks with the party and agreed to support tax increases to help close a record $42 billion budget shortfall, potentially ending a political deadlock that has gripped the Capitol for more than six days

......

“We need to stop treating the taxpayers of California as our personal ATM,” said Senator Tony Strickland, a Los Angeles- area Republican.

The 8.25% sales tax is the min set by the state. Different cities in the state can set their supplementary sales tax. Eg. City of of South Gate has a sales-tax of 10.25%

[Phlkxkbh]

raise taxes is a success ah??