Increase On Sales Tax Needed, Schwarzenegger Announces

by Glen Shapiro, LawAndTax-News.com, New York

06 August 2008

Governor of California, Arnold Schwarzenegger has announced this week that he wants to see the introduction of a temporary penny sales tax increase in order to boost the state's ailing finances.

Schwarzenegger's new proposal would see the rate of sales taxes within the state increase by a penny for the next three to four years, followed by a quarter of a cent drop on the current level.

Currently, California's sales tax rate stands at 6.25%.

Schwarzenegger's plan would be a step in the direction of eradicating the USD17.2bn state budget deficit - but implementation of the tax increase would require a two-thirds vote in both houses of the Legislature, along with the governor's signature, before it could take effect.

There has been somewhat of a mixed reception to Governor Schwarzenegger's plan, along party lines as anticipated.

According to reports, were the increase to receive approval, the state would earn around USD4bn in the remainder of the current fiscal year, and up to USD6bn in each of the next two years.

This weeks news has come as a surprise for many who believed Schwarzenegger to be a man of his word when it came to opposing tax increases, but others have argued that such a move may represent the only way to resolve the impasse over the California budget.

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