California Democrats in Sacramento are conspiring to evade the state constitution and pass a tax hike of up to $11 billion in the next few days.

State law requires a two-thirds majority of the California legislature to raise taxes. But the Democrats who run the state house and senate by big margins have gotten frustrated by the anti-tax bloc of Republicans who have held an effective veto over the tax scheme. Democrats have come up with a plan to raise income, sales and gas taxes without the two-thirds vote, thanks to some fancy legal maneuvering. An enraged Mike Villines, the House minority leader, tells me: "This is just a ploy to get around the constitution. We will fight it."

California Democrats have decided to call the tax increases "fees," which they claim are not covered by the constitutional supermajority requirement. Under the plan, the gas tax would roughly double to 36 cents a gallon and taxpayers would be hit with 2.5% income-tax surcharge. These "fees" sound awfully like taxes. California already has one of the highest income tax burdens in the nation.

Democrats are getting desperate for revenues because what was projected to be a $12 billion deficit just six months ago has swelled to $42 billion, according to estimates released this week.

But yesterday Governor Arnold Schwarzenegger threw a wrench in the Democratic maneuver by announcing he would not sign this tax hike without longterm budget reforms and economic stimulus measures. "We are going toward a financial Armageddon," he declared. Not that Mr. Schwarzenegger is hostile to new taxes: The governor has proposed his own catalog of new taxes to close the budget gap and at times has seemed more at war with his own party than the Democrats.

Republicans in the legislature are furious that the governor’s finance director, Mike Genest, took a slug at the GOP in the governor’s weekly radio address. He lashed out as follows: "The Republicans have a set of demands they want met before even talking about raising the taxes we need to keep government running. That’s how you conduct a hostage negotiation. But in a hostage negotiation at least you know when demands are met the hostage is released. In this case, Republicans would only be willing to consider letting the hostage go."

Dave Cogdill, Republican leader in the state senate, told me in a telephone interview that the bullying tactics aren’t working: "We’re not going to agree to tax increases. Period. High taxes are what are killing this state."

It’s doubtful that even if the Terminator negotiates with the Dems, a tax-hike settlement that end-runs Republicans in the legislature would get through the courts. Several taxpayer groups and legislators have threatened lawsuits on constitutional grounds. The budget proceedings in Sacramento have turned into a three ring circus, but no one in the state is laughing.

This entry was posted on Friday, December 19th, 2008 at 12:00 am and is filed under Blog Posts.