Governor Wants to Raise Taxes

State Legislature called into special session

Thursday, Nov 6, 2008  |  Updated 1:59 PM PDT
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Governor Calls Legislature Back

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Gov. Schwarzenegger is proposing $4.4 billion in tax increases and billions more in spending cuts.

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Governor Calls Legislature Back

Gov. Arnold Schwarzenegger on Thursday proposed a temporary 1.5 percent sales tax increase to deal with California's worsening fiscal crisis, which has created an $11.2 billion deficit in this year's budget.
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Gov. Arnold Schwarzenegger on Thursday proposed a temporary 1.5 percent sales tax increase to deal with California's worsening fiscal crisis, which has created an $11.2 billion deficit in this year's budget.

"We have a dramatic situation here, and it takes dramatic solutions ... and immediate action," the governor said as he called the Legislature back into session to deal with the budget shortfall. "We must stop the bleeding."

Just six weeks ago, Schwarzenegger signed an overdue state budget that was intended to close a $15.2 billion deficit. The rapid pace of decline in the national and state economies since then has reopened that gap and threatens to widen it even more in the months ahead.

He said the state's economic condition has deteriorated significantly, with a cratering stock market and the continued decline of the housing industry. California's budget relies greatly on capital gains taxes, which have dropped precipitously in recent months as stock prices have plummeted. Sales and property taxes also have declined. "Many Californians have lost their homes, they've lost their jobs ... and everyone is worried about their future," Schwarzenegger said.

The worsening conditions are spreading throughout state government. California's unemployment insurance fund, which helps those tossed out of work pay their bills, is expected to be insolvent by January

Schwarzenegger proposed $4.4 billion in tax increases, including a temporary sales tax increase. He did not specify how long the increase would remain in effect. He also alluded to bringing in more money through other "revenue generators."

The governor said $4.5 billion in cuts will be necessary across all state programs, including education, social services, health care and prisons.

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