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The Governor's Budget Proposal

Wilson Offers Sweeping Plan to Raise Funds

Taxes: Cost of candy, liquor, car licenses would be among the items increasing under the proposal. Few Californians would escape wide range of levies.

January 11, 1991|RICHARD C. PADDOCK, TIMES STAFF WRITER

SACRAMENTO — Californians will pay more for their cars, candy, booze, junk food, newspapers and magazines under the tax plan offered Thursday by Gov. Pete Wilson.

In a sweeping tax proposal that will hit virtually everyone in the state, Wilson called for raising $1.8 billion through a variety of higher taxes--including an increase in motor vehicle license fees and a hike in the alcoholic beverage tax.


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For the first time, candy, snack foods, newspapers and periodicals all would be subject to the state sales tax. In addition, independent contractors' income, employees' bonus payments and income earned by estates and trusts would be subject to income tax withholding for the first time.

The new Republican governor emphasized that he was not proposing a "general" tax increase, such as an income tax or sales tax hike. But few Californians will escape the new levies proposed by Wilson to help compensate for an estimated $7 billion shortfall in state revenues.

"We felt we had to increase certain revenues to avoid Draconian cuts," Wilson said. "I did not want to cut health programs. I think a tax on candy and newspapers and a tax on beer, wine and hard liquor is a great deal more equitable."

The increase in vehicle license fees is the single largest component of Wilson's tax plan, bringing in an estimated $781 million annually.

Under Wilson's plan, increases in the annual fees will range from 5% to 20%, depending on the age of the car. This will be accomplished by leaving the 2% tax rate untouched--but raising the assessed value of each vehicle upon which the fee is levied. The license fees decline over an 11-year period.

For example, under the current system, a new $10,000 vehicle is assessed at 85% of its purchase price and a 2% tax is levied for a total payment of $170. Under Wilson's plan, the same car would be assessed at its full value, raising the fee to $200, said state budget analyst Anthony Moss.

By the fifth year of ownership of the same car, the license fee is $80 under the current law. Under Wilson's plan the fee would be $120. After 11 years, the fee would drop to the minimum, $30. Under current law the minimum is $10.

Despite persistent attempts to increase the state's tax on alcoholic beverages, industry lobbyists have succeeded for decades in maintaining low tax rates for beer, wine and spirits.

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