Official suggests delaying corporate tax breaks

By JUDY LIN

Associated Press

SACRAMENTO -- California's nonpartisan budget analyst told lawmakers they should consider raising the alcohol tax and delaying corporate tax breaks to help deal with the state's $19.1 billion deficit.

Increasing the vehicle license fee permanently, raising community college fees and reducing certain tax credits were among some of the other recommendations in a report issued by the Legislative Analyst's Office.

The report came May 18, days after Gov. Arnold Schwarzenegger released his revised plan for closing California's deficit for the new fiscal year that starts in July. He proposed, among other measures, eliminating state-subsidized child care and California's welfare-to-work program, which provides cash assistance and other services for low-income families with children.

"These are core programs that provide income and services to lowest-income Californians, and we think we should do everything we can to preserve the programs," Legislative Analyst Mac Taylor said during a news conference.

Among the possibilities was delaying corporate tax breaks given in recent years.

In January, Schwarzenegger proposed delaying $2.4 billion in business tax credits by one year if the federal government didn't step in with additional money. The governor backed off the plan last week.

The analyst's office recommended delaying those tax credits by two years, noting the state will begin to lose nearly $10 billion in temporary tax hikes in the 2011-12 fiscal year.

The report also recommended making permanent a 0.5 percent state vehicle license fee increase to better align with other personal property tax rates.

Taylor suggested adjusting the alcohol tax because it has not been updated for inflation since 1991. Such an increase would raise $200 million a year.

Taylor's call for a balanced approach of program cuts and revenue increases did not necessarily resonate with some lawmakers.

Assembly Minority Leader Martin Garrick, R-Carlsbad, said he would rather focus on cuts than higher taxes. Both Garrick and Schwarzenegger have said new taxes would hurt California's economy and drive jobs away.

"The governor's plan rightly emphasizes spending reductions as the solution to our ongoing budget problems, not higher taxes," Garrick said in a statement.

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