Schwarzenegger Continues To Rule Out Californian Tax Hikes

by Leroy Baker, Tax-News.com, New York

08 January 2004

In his first State of the State address as Californian Governor, actor-turned-politician Arnold Schwarzenegger once again reiterated his pledge not to raise taxes despite the state government’s dire financial position.

Instead, Gray Davies’ successor plans to rely on a $15 billion bond issue and a program of spending cuts in the months ahead when he unveils his fiscal 2004/2005 budget on Friday. An increase in tax, on the other hand, would be the “final nail in the coffin for California” according to Schwarzenegger.

"Together, we put measures on the March ballot that, if passed by the people, will save our state from a June bankruptcy," he told the legislature, warning that: "June is the month when billions of dollars in past loans come due and the financial house of cards built over the last half of the decade is set to collapse."

However, Schwarzenegger was able to take some comfort from an announcement by State Controller Steve Westly, who revealed that California’s tax revenues are 3.8% higher than expected at the mid-point of the state’s fiscal year. Still, the unexpected $1.27 billion increase in revenues will not fill the potential $14 billion budget gap, Westly pointed out.

"A stronger economy gives the governor an assist, but won't do the heavy lifting," he observed.

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