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Tax Hikes Key to Bustamante Economic Plan

August 20, 2003|Matea Gold and Evan Halper | Times Staff Writers

SACRAMENTO — Lt. Gov. Cruz Bustamante proposed an economic plan Tuesday that would rely on an $8-billion tax increase -- primarily on businesses and the wealthy -- in order to reduce vehicle license fees and close the state's budget gap.

The only prominent Democrat on the Oct. 7 ballot to replace Gov. Gray Davis, Bustamante laid out a program that would have little chance of approval in the state Legislature but may appeal to many core Democratic voters. In the multi-candidate race to replace Davis, solid support from Democrats and liberals could provide Bustamante the plurality he would need for victory.

Republican candidates Bill Simon Jr. and Tom McClintock have championed cutting government spending and eliminating waste, a message that resonates with their voting base. And Peter V. Ueberroth released a plan Tuesday that reflected his centrist campaign but that was light on specifics.

Bustamante outlined his proposal, which he dubbed "Tough Love for California," during a morning news conference outside his beige stucco tract home in a Sacramento suburb.

It would raise taxes by nearly $8 billion, including significant increases in income taxes on the state's top earners and on commercial property -- which would require a constitutional amendment to revise Proposition 13. It also would add $1.50 per pack to the cigarette tax and 25 cents per gallon to alcohol taxes.

With unspecified budget cuts of $2 billion -- along with a crackdown on fraudulent Medi-Cal claims and a measure that would require more employers to provide health coverage -- Bustamante said the state could eliminate its projected $8-billion budget shortfall and partially reverse the recent increases in the car tax and community college fees.

"It is tough love, but the people of the state of California understand what it is to make sacrifices," Bustamante said.

There was one means of raising new revenue that Bustamante did not propose: asking Indian tribes to give more of their gambling profits to the state.

"If you look at the amount of resources that are being paid by the tribes, I think that you'll see that they're paying a considerable amount of money already," said Bustamante, who has received substantial contributions from Indian tribes in past campaigns.

That prompted a jab from rival candidate Arianna Huffington. "How can Bustamante keep a straight face while saying that a $5-billion industry that pays absolutely nothing into the California general fund is paying enough?" she said in a prepared statement.

Davis' budget proposal earlier this year sought more money from California tribes.

Coming on the heels of a fractious budget battle that deadlocked the Legislature for much of the summer, Bustamante's plan immediately rankled Republicans, who suggested it would be dead on arrival in the Legislature.

"It sends the message, 'We don't want high-income people and we don't want business,' " said Senate Budget Committee Vice Chairman Dick Ackerman (R-Irvine). "We just went through a year with no tax increases and it took everybody a year to realize Republicans were not going to vote for new taxes. So he comes out of the chute with $8 [billion] to $10 billion in new taxes. It is completely unrealistic."

Budget analysts agreed that the plan would stand almost no chance of passing the Legislature. It has even higher taxes than the original budget proposed by Davis in January, which the governor abandoned after it became clear the plan would not get the needed two-thirds approval from both the Assembly and Senate.

"He would have the same problem Gray Davis had with his tax package back in January," said Jean Ross, executive director of the California Budget Project, a group that researches the effects that budget decisions might have on low-income Californians.

As a former Assembly speaker, Bustamante insisted he would be able to turn to allies in the Legislature for support. Failing that, he said, he would gather signatures to put his budget on the ballot as an initiative.

"Once and for all, we'll either get out of this mess together or we'll have no one to blame but ourselves," he said.

Mark Baldassare, research director of the Public Policy Institute of California, was skeptical about asking voters to raise $7.9 billion in taxes and fees, as called for in Bustamante's plan.

"It would easily be targeted by various interest groups and the whole thing could collapse," he said.

Democratic political strategist Gale Kaufman of Sacramento, who is not affiliated with any campaign, said Bustamante's immediate goal is demonstrating an understanding of the state's complicated finances and establishing his values as a candidate. "In the next two months he doesn't have to pass this proposal," Kaufman said. "He needs to show people that he understands the job of governor.... Whoever is going to give an economic plan right now is talking to the voters."

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