Under threat of veto, gas tax package on hold

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Democratic state senators are putting the brakes on a plan to change the way gasoline is taxed in California because Gov. Arnold Schwarzenegger has indicated he would veto their current proposal. Lawmakers and the governor are now negotiating to try to craft legislation Schwarzenegger would sign.

The state Senate had been expected to take up a package today that would swap certain gasoline taxes, as well as suspend two recently passed corporate tax breaks. As a result of the tax swap, public transit funding would be cut.

Aaron McLear, a Schwarzenegger spokesman, said the governor would veto any plan that includes suspending a tax break that allows companies to carry their net losses forward year over year.

It “is a tax increase that will kill jobs right at the time when we ought to be creating jobs,” McLear said. The second corporate tax break the Democrats want to suspend, which allows companies to share tax credits with various subsidiaries, would be “very difficult for us to support,” McLear said.

Another controversial aspect of the Democratic plan would empower local authorities to raise gasoline fees to pay for mass transit, as long as voters approved the new fees in a subsequent election. Democrats are pushing the idea to help blunt some of the mass transit cuts in the budget.

“It’s not something we should be talking about right now,” McLear said. “It doesn’t cut spending, it doesn’t create jobs.”

-- Shane Goldmacher in Sacramento