Typically, tax increases and budget votes require a two-thirds majority. Since just over one third of the Assembly is controlled by Republicans, that means Democrats need at least a handful of GOP votes. However, late Sunday night Assembly Democrats passed a $23.4 billion package of cuts, tax and fee increases, and accounting tricks designed to close a gaping hole in the budget for the fiscal year that starts Wednesday. The vote was made without a single Republican vote courtesy of a legislative loophole which requires only a simple majority vote for “fee” increase.
Sunday night’s package holds nearly $2 billion in tax and fee hikes including: a 9.9 percent tax on oil production, a $1.50-per-package tax on cigarettes and a $15 per vehicle registration fee.
While tax hikes normally require two-thirds approval, Democrats argued that by eliminating an 18-cent per-gallon excise tax on gasoline, the net revenue to the state becomes zero and thus doesn’t represent a tax hike. Sunday’s bills then would replace the excise tax with an equivalent fee, which Democrats argue does not require a two-thirds vote.
Bloomberg’s budget team reports ,”Democrats, who control the legislature, are at an impasse with Republicans and Schwarzenegger over whether to make up the difference with spending cuts or tax increases. Absent a fix by July 1, the state will begin issuing IOUs to pay bills.
The State Assembly spent nearly two hours Sunday night debating Assembly Bill 39, which included the fee increases. The bill ultimately passed, 44-30, with two Democrats voting no.
While the plan was debated on the floor, Bass was exchanging words with Senate Minority Leader Hollingsworth and negotiating with the governor on an alternative and.
The leader of the Assembly’s minority Republicans, Sam Blakeslee (R-San Luis Obispo), said the proposal is illegal and Democrats would set back budget negotiations by passing it.
Meanwhile the Senate adjourned at 9:30 p.m. Senate President Pro Tem Darrell Steinberg (D-Sacramento), said that senators would take up the majority vote package this morning.
Gov. Arnold Schwarzenegger has vowed to veto any budget package that includes tax increases, and he vetoed a budget last winter that contained a similar tax ploy.