California Explores Revenue-Raising Options

by Mike Godfrey, Tax-News.com, Washington

11 February 2005

Johan Klehs, the Democratic chairman of California’s Assembly Committee on Revenue and Taxation, has issued a list of tax raising options to help plug the state’s $9.1 billion budget deficit.

Included in Klehs’s list is an increase in the state’s personal income tax level to raise an additional $2.2 billion in revenues, limiting the use of corporate tax credits to between 50% and 75% of tax liability, raising up to $380 million, and raising the state’s corporate income tax rate by an unspecified amount.

Another option includes reining in business tax relief measures to raise a potential $6.9 billion.

"Right now it's a matter of really raising the literacy of the issue,” Klehs stated, according to Reuters.

However, he added that: "I think there will be legislators who carry legislation to close these loopholes."

California’s Governor, Arnold Schwarzenegger, is unlikely to take Kleh’s advice. During his tenure in office Schwarzenegger has steadfastly stuck to an anti-tax hike line, preferring instead to solve the deficit through a combination of spending cuts and debt issue.

“We're happy to look at their list. But the root of the problem isn't that Californians are somehow under-taxed. It's the fact that California has spent too much," stated Finance Department spokesman H.D. Palmer.

"Increasing taxes at a time when we are trying to revitalize California's economy and job growth would be the wrong way to go," Palmer added.

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