Californian Governor, Arnold Schwarzenegger has suggested that a temporary 1% increase in sales tax is still needed to help plug the state's USD15bn budget deficit.
The idea was first proposed by the Governor during this summer's budget talks, but was overruled due to a lack of Republican support. The summer's budget talks ended 85 days late, as a decision could not be made concerning the budget deficit.
During the budget deliberations, Schwarzenegger proposed that the state's sales tax should be increased temporarily, by 1%, for a period of three years (excluding diesel, gasoline and jet fuel), but then reduced permanently by 1.25% in year four.
Other plans to fix the deficit now include further cuts to the state's education funds of between USD2bn and USD4bn. The budget, signed only last month, is said to face a USD5bn to USD8bn shortfall due to the rapid decline of state revenues.
It was previously hoped such measures could be avoided through a combination of spending cuts, borrowing, and the one-off use of reserve funds.
Schwarzenegger will call lawmakers back on November 5 to resume talks.
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