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Assembly Democrats call for new oil tax, borrowing from Wall Street to balance California's budget

May 25, 2010 |  2:25 pm

State Assembly Speaker John A. Perez on Tuesday outlined an alternative path to balancing California's budget that would raise oil taxes, delay corporate tax breaks and borrow billions from the nickel-and-dime deposits consumers make on recyclable bottles -- and would not require any Republican support.

At the heart of the proposal is the idea of raiding the state's bottle deposits for the next 20 years and then getting an $8.7-billion loan from Wall Street. The programs currently funded by bottle deposits would be reimbursed by a new tax on oil production.

Perez (D-Los Angeles) called his budget plan a "unique and creative approach." A spokesman for Gov. Arnold Schwarzenegger called it "legal gymnastics."

Under his plan, the speaker would cast aside almost all the budget cuts Schwarzenegger proposed earlier this month. The state would use the borrowed money from the bottle deposits to fund programs this year.

To pay back the loan in the future years, the state would then levy a nearly 10% oil severance tax.

Got all that? Good. There's going to be a quiz at the end of this blog post.

Perhaps the key feature to his plan, according to Perez's office: Democratic lawmakers could bypass their GOP colleagues, whose votes are typically required to raise taxes, in approving the proposal.    

How? A convoluted mechanism that would swap existing state sales taxes for local sales taxes in order to skirt state law that requires a two-thirds vote of the Legislature to raise taxes. Consumers would pay the same on taxable purchases.

The governor's office immediately dismissed the idea.

"The Assembly Democrats' budget proposal includes no real spending cuts and no real reforms -- only legal gymnastics for majority vote tax increases," said Aaron McLear, a Schwarzenegger spokesman.

-- Shane Goldmacher and Anthony York in Sacramento

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