Tax hikes and you

As the state's budget standoff drags on, legislative Democrats have proposed $8.2 billion in tax increases to help close the $15.2 billion deficit in the $101 billion general fund. Republicans say they will block the package, and Gov. Arnold Schwarzenegger says, "I'm open-minded, but I'm against tax increases."

New tax brackets for high earners

How it would work: Permanently creates two new income tax brackets above the current 9.3 percent top bracket. Joint filers would pay 10 percent on taxable income above $321,000 and 11 percent on income above $642,000.

Whom it would affect: About 330,000 tax returns would be subject to the 10 percent rate, and 130,000 of them would hit the 11 percent bracket.

What it would raise: $5.6 billion

Debating points: Democrats say this simply reinstates brackets temporarily imposed in the past, and note that taxpayers could write off the increase on their federal taxes. Critics counter that it would exacerbate the state's already unhealthy reliance on the income tax.

Smaller tax write-off for kids

How it would work: Taxpayers now can write off $294 for each child. For joint filers with an adjusted gross income of more than $150,000, the write-off would be lowered to $94 per dependent. That's the same amount a taxpayer can write off for himself or herself.

Whom it would affect: About 1.2 million tax returns would lose the dependent credit.

What it would raise: $215 million

Debating points: The move would return the write-off to what it was for all filers 11 years ago. Opponents say it would hurt families.

Suspend bracket indexing

How it would work: Tax brackets would not be adjusted for inflation this year. A taxpayer with an adjusted gross income of $50,000 would pay about $34 more. A taxpayer with an AGI of $97,000 would pay $180 more.

Whom it would affect: About 9.5 million returns - about two-thirds of all that are filed.

What it would raise: $815 million

Debating points: If low-income people are hit by health and social service cuts, Democrats say, others should bear a burden as well. Republicans say any tax increase is a bad idea in a struggling economy.

Suspend business write-offs

How it would work: For three years, businesses would be unable to deduct their net operating losses against future earnings. When this maneuver was used in the past, the state later relaxed the rules so businesses could recoup some of their money. It's unclear if that would happen in this case.

Whom it would affect: About 130,000 businesses would likely use the deduction and would be subject to the suspension.

What it would raise: $1.1 billion

Debating points: The move would hurt the ability of business, especially small businesses, to survive in a down economy.

Increase business franchise tax

How it would work: The top bracket for corporate taxpayers would rise from 8.84 percent to 9.3 percent.

Whom it would affect: About 130,000 businesses would be subject to the higher rate.

What it would raise: $470 million

Debating points: Democrats say the plan returns the top rate to its 1997 level. Critics say increasing the burden on businesses will drive them out of state, costing jobs and state revenue.

Sources: Assembly and Senate Democrats, Department of Finance, Franchise Tax Board, Bee file photos