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In California, When Is A Tax NOT A Tax?

Today the Democrat-controlled legislature in California is hoping to raise $9.3 billion in revenues through a legal loophole. Under state law, a two-thirds vote is needed to raise taxes, and that means some Republican votes are needed. So far, Republicans have not budged on a budget package that includes tax hikes to close California's gaping $15 billion shortfall, a shortfall which could reach $42 billion in 18 months (at least that's what they tell us).

So, how to get around the Republicans? By raising "fees", not taxes. Approving fees only requires a simple majority, something the Democrats can do without a single Republican vote.

The Democrats are citing wording in state law which allows them to pass a tax bill as long as it doesn't raise revenues. So...follow me here...I think I've got this right...they plan to remove some taxes and replace them with other taxes plus fees. Then they'll raise the fees, which can be done with a simple majority.

What kind of fees are we talking about? A 13-cent extra fee on every gallon of gas, a 3/4 percent hike in sales taxes (fees?), and a 2.5 percent surcharge on personal income in 2009. A surcharge, not a tax, even though the money comes out of your paycheck and goes to the state.

The Democrat plan also includes $7.3 billion in cuts to programs. If this passes, Republicans and the Howard Jarvis Taxpayers Association plan to head straight to the nearest courthouse to file suit. They are preparing to vote as we speak.

Meantime, I heard from a businessman who sells products to the state's prisons. He says the prison officials' credit cards are maxed out and he will no longer accept them. He is only accepting cash ON ORDER from the state. "We need full payment before we ship ANYTHING to any state entity," he says. Why not accept cash on delivery? "They could refuse the order, then we get screwed for the shipping cost."

Late Update: The legislature this evening passed the new budget package with a majority (but not two-thirds) vote, but the Governor says he will not sign the bill, saying, "it fell short on every single level."

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