SACRAMENTO - Senate Republicans offer a number of comments regarding the Democrats' budget proposal voted on earlier today, which would raise taxes on middle-income families and small businesses:

Senate Republican Leader Dennis Hollingsworth (R-Murrieta): "Our budget brings spending down to a sustainable level, balances the budget, and does it without raising taxes.

The Democrats' plan spends much more than we have, and raises taxes nearly $5 billion on California working families in order to protect welfare programs we can't afford."

Senator Bob Dutton (R-Rancho Cucamonga), Budget Vice Chair: "The solution to California's budget crisis is creating private-sector jobs, jobs, jobs."

Senator Bob Huff (R-Diamond Bar), Caucus Chair: "Until the Democrats accept the hard reality of our budget situation - that we can't print money like the federal government, that there's no miracle bailout coming from Washington, that the economy isn't going to grow like Jack's Beanstalk and save every sacred spending cow - we will remain without an approved budget."

Senator Tom Harman (R-Huntington Beach), Republican Whip: "The illogical premise in the Democrats tax increase budget was exposed today. In their own words, "rich relatives" are morally obligated to pay more because they have "hit the lottery of life." Californians making $50 thousand a year, or rich relatives as the Democrats categorize them, have not hit the lottery in life. Supporting a family of four on $50 thousand a year is near the poverty level in some parts of California - not the lottery level. The budget is more than 60 days late and we are back at square one."

Senator Mark Wyland (R-Carlsbad): "Democrats again are proposing that California spends more money than it will take in—the exact action that got us into this mess in the first place! And to make up for that loss of revenue, they want to do the worst thing possible: raise taxes on Californians. What we should be focusing on is fueling our economy by passing a budget that promotes job growth."

Senator Tony Strickland (R-Thousand Oaks): "The Democrats in Sacramento continue to treat Californians like a personal ATM machine every time the state runs out of cash. Their budget proposal is no different, raising taxes by $4.5 billion. Families across California have to live within their means and make tough budget choices - shouldn't the California government have to do the same? I support a plan which will grow California's economy and put hardworking people back to work WITHOUT raising taxes."

Senator George Runner (R- Antelope Valley): "The Republican budget plan was crafted based on conservative projections of California's revenue stream. It's balanced with no tax increases and has a prudent reserve of $900 million. Sure, it makes tough reductions. But it makes the same difficult decisions families and businesses are having to make."

Senator Sam Aanestad (R-Grass Valley): "The Republican budget contains real reform and results in a balanced budget that does not raise taxes. The Democrat idea of budget reform means the average family in California will pay an addition $473 in new taxes."

"If California's economy is ever going to recover, we need to pass legislation that encourages job creation and let working families keep more of what they earn. Above all, we must put an end to the practice of simply raising taxes to cover the skyrocketing costs of government while ignoring the need for meaningful budget reform that limits the growth of spending."
- Senate Republican Leader Dennis Hollingsworth (R-Murrieta)

Californians are burdened by one of the highest and most oppressive tax systems in the nation. Despite this fact, Democrats in the California Legislature have introduced more than a dozen proposals this year to raise taxes even higher—and that's after pushing through $12.5 billion in new tax increases last year!

Every day, Californians pay:

• 8.25% Sales Tax: Highest State Sales Tax Rate in the United States - Franchise Tax Board
• 63.9¢ per gallon Gas Tax: Highest Gas Taxes in the Country - Tax Foundation
• 10.55% Income Tax: Second Highest Income Tax Rate in the United States - Forbes Magazine

If we want to fix the budget once and for all, we must reduce state spending, increase efficiency and minimize waste and abuse within government, and create private-sector jobs.

You may recall last year, Democrats in Sacramento rammed through the largest tax increase in the state's history. Then, they asked voters to extend those taxes in a special election.

California voters said, "No!" by a margin of nearly 2 to 1.

No problem. Wait a year... and Democrats have proposed more taxes again. It's like water wearing away stone. Democrats believe that if they introduce tax increases often enough, eventually taxpayers' opposition to new taxes or additional tax increases will erode.

The Democrat tax proposals include:

+$14 Billion: New Income Tax Increase on Californians - Democrats have proposed increasing taxes on thousands of Californians including many owners of job-creating businesses (AB 1836-Furutani), for a $14 billion tax hike over 5 years.

+$1.4 Billion: New Taxes on Oil = Higher Gasoline Prices - Two measures (AB 1604-Nava and AB 656-Torrico) would impose a new oil severance tax. Despite the Democrats rhetoric, these measures will surely lead to higher gas prices at a time when gas prices are soaring past $3 per gallon, plus an unknown additional tax per-gallon from a separate gasoline tax swap proposal.

+$1 Billion: Increasing the "Surcharge" on Personal Income Taxes - A PIT surcharge of 0.25 percent took effect in 2009 with the promise it would end in December 2010. Now, Democrats want to break that promise by forcing the people of California to continue supporting out-of-control state spending.

+$1.2 Billion: Increasing the Vehicle License Fee - Democrats have proposed an increase to the VLF of 0.35, which would result in vehicle owners with a car valued at $30,000 paying an additional $100 a year.

+$9 Billion: Increasing the Alcohol Tax - The "societal costs" Democrats allude to when pushing this tax are anecdotal, and there is no clear nexus between the level of taxes on alcohol and the services provided to combat the related problems, whether it be through court costs, or diversion programs, or alcohol abuse programs.

+25¢ per bag: New Grocery Store Bag Tax - Democrats have proposed legislation (AB 1998-Brownley) that would impose a new green bag "fee" of at least 25 cents on each bag Californians use to carry home their groceries.

+$1.38 Billion: New Per Teaspoon of Sugar Tax on Soda - Democrats are pushing two measures (AB 2100-Coto and SB 1210-Florez) to tax the soda that you drink to fund new programs we can't afford. One proposal would add a one-cent per teaspoon of sugar tax that would amount to a 10-cent per can tax increase on a 12 ounce can of soda.

+$40 Million: New $3 per Traffic Ticket Tax - Democrats even want to impose a new $3 tax (AB 2173-Beall) on every traffic ticket given to Californians, to pay for more government spending. Estimated statewide cost to drivers: $40 million.

+$265 Million: New Tax on Parking at Work - Democrats want to take away the income tax exclusion (AB 2640–Arambula) that workers receive for free or subsidized parking from their employers, treating this job benefit as taxable income. This would be a significant new expense on the wallets of working Californians. Cost to California workers: $265 million over 3 years.

+$480 Million: New 4.8% Home Insurance Policy Tax - With many struggling to avoid foreclosure, Democrats want to impose a new 4.8 percent tax (SB 1258-Kehoe) on the insurance policies of homeowners and property owners.

+Internet Tax: Out-of-State Internet Retailers Tax - AB 2078 (Calderon) is pending in the Senate. California is supposedly committed to bringing in new jobs, which are badly needed since California workers are suffering from an unemployment rate of over 12%. This bill puts tens of thousands of more jobs in jeopardy. In New York, more than 200 Internet retailers terminated their advertising arrangements with New York web-businesses after their law passed. As a result, over 1,400 affiliates closed up causing hundreds to lose their jobs. There are an estimated 25,000+ internet business affiliates in California.

+Taxing the Miles You Drive: New Tax on the Miles People Drive - Showing they will pull out all the stops to find new ways to tax Californians, Democrats have proposed a pilot program that could eventually lead to the state taxing motorists on the number of miles they drive their car each year (SB 1299-Lowenthal).

HUNDREDS OF BILLIONS IN LOOMING COSTS FOR EMPLOYERS, RATEPAYERS, PROPERTY OWNERS AND LOCAL TAXPAYERS

Some of the tax increases proposed or enacted by Democrats in recent years will cost hundreds of billions to taxpayers and ratepayers over the next decade. The costs of some of these proposals are staggering:

+$210 Billion: New Health Care Taxes - Democrats are pushing a new California government-run health care plan (SB 810-Leno) that would be paid for by a yet-to-be-determined new jobs tax, which could result in tens of billions in new taxes on employers and threaten job creation. A prior version of this scheme was projected to cost $210 billion annually.

+$146 Billion: New Global Warming Taxes - Liberal bureaucrats at the California Air Resources Board are proposing costly new regulations to implement the global warming law, AB 32. A proposed "cap and trade" plan could result in $146 billion in new costs for $60 per ton of emissions, passed along to consumers, utility ratepayers and taxpayers.

+$420 Million: Repealing Job Creating Tax Incentives - As the state's unemployment rate hovers at 12.6% and small businesses are struggling to stay open, Democrats are proposing bills (AB 1935 and AB 1936-De Leon) that will take away two job creating tax incentives (single sales factor and net operating loss carryover) that are critical for job creation.

+Billions: Paving the Way for New Local Tax Increases - Democrats want to make it easier to raise taxes at the local level. They have proposed legislation (AB 2113-Evans) that would authorize cities and counties to establish local income taxes and car taxes that would essentially add a second and third layer of taxes on vehicles and personal income.

+Billions: Split Roll Property Tax - Democrats want to increase taxes on the property owned by businesses that create jobs in California. They have proposed a measure (AB 2492-Ammiano) to require reassessment of all corporate property in the state when that company changes ownership. The resulting rise in property taxes is estimated to take $6 to $8 billion from business property owners, hitting small business hardest. One member of the California Tax Commission offered this consolation to business owners—the tax hit may not be so hard since the new tax would lower property values. Of course, business owners know that simply lowers their ability to get credit to run their businesses from day-today.

Executive Summary

When the Governor signed the revised 2009 Budget Act in July 2009, the anticipated budget deficit for 2010-11 was $6.9 billion.  However, largely as a result of continued economic weakness and because many of the budget solutions failed to deliver the anticipated savings, the budget gap has grown to $19.9 billion ($6.6 billion in 2009-10 and $12.3 billion in 2010-11) including $1 billion for a reserve.

The Governor indicates that $4.9 billion of solutions have been lost as a result of federal and state court decisions (e.g., In-Home Support Services program changes, sale of State Compensation Insurance Fund, and use of certain transportation funds to offset General Fund expenditures) – though there are several billion dollars more at-risk in other lawsuits that have not yet been acknowledged in this budget (i.e., state worker furloughs, use of Redevelopment Agency funds, several tax cases and Medi-Cal provider rate cases.)   In addition, increased population/caseload driven costs ($1.4 billion) and the “erosion” or failure to achieve some of the enacted solutions ($2.3 billion) such as the state prison and Medi-Cal savings have contributed to the increased budget gap.  Lower than anticipated revenues account for another $3.4 billion of the identified budget deficit.

In order to generate immediate action and focus on the state budget, the Governor proclaimed a “fiscal emergency” pursuant to his Proposition 58 (2004) authority. The Proposition 58 special session requires the Legislature to send the Governor a bill addressing the fiscal emergency within 45 days or it cannot act on any other bills.  The Governor has proposed about $1.2 billion of “special session” solutions for 2009-10 that grow to nearly $7.7 billion in 2010-11 (totaling $8.9 billion).  If the legislature waits until July 1, the savings would be reduced by over $2.4 billion – that is the cost of delay.

The Governor’s proposed 2010-11 Budget includes a combination of major spending reductions, some fund shifts and “other” revenue increases (e.g., sale of EdFund and sale-leaseback proposals), a new category called “alternative funding” that appears to be more new revenues and fund shifts (e.g., Proposition 10 and 63 funds, add speeding violations to red light cameras, Tranquillon Ridge, Emergency Response Initiative, etc.) and a considerable expectation for new federal funds– but no new general taxes – to make up the budgetary shortfall.

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