The Senate Budget Committee on Tuesday approved rollbacks of two corporate tax benefits as part of a complex gas-tax swap to help close the state's $19.9 billion deficit.
The committee also approved a 4.8 percent surcharge on residential and commercial property insurance, which would raise roughly $200 million for the general fund.
The Democratic proposal allows companies to apply only 68 percent of past operating losses against their income in 2010, shrinking that tax benefit and increasing state revenues from corporate taxes. Existing state law allows companies to apply 100 percent of certain past operating losses against income in 2010.
The proposal also would prevent corporations from assigning tax credits in 2010 to affiliated corporations or subsidiaries. Current state law allows that practice to occur starting this year.
Those two changes would allow the state to raise $655 million for the general fund. Democrats believe they can pass the changes on a majority-vote basis because they are decreasing taxes on gasoline by a comparable amount, theoretically making the change "revenue neutral." Gov. Arnold Schwarzenegger had proposed suspending those two tax benefits -- among others -- but only if the state failed to get enough federal help.
The California Teachers Association is gathering signatures to place an initiative on the November ballot that would block those tax benefits permanently.
The Senate Budget Committee passed the changes Tuesday on an 8-2 party-line vote. The full Senate and Assembly would still have to approve the plan.
The thrust of the gas-tax plan is the elimination of state sales tax on gasoline, replacing that sales tax with an excise tax on gas. That would allow the state to account for gasoline taxes in a different way that saves the state $920 million in general fund dollars. All told, the proposal would cut the deficit by nearly $1.6 billion. Drivers would save roughly 3 cents per gallon in 2010--11.
Transit agencies would lose out under the Democratic plan, but not by as much as under Schwarzenegger's proposal. Democrats would preserve sales tax on diesel fuel, generating an estimated $313 million annually. The state also would give transit agencies $400 million for operations out of an existing transportation account.
The Democratic plan would allow local governments to place on the ballot an additional fee on gasoline to pay for transit. Voters would have to approve any such fee by a majority vote.
Republicans questioned that part of the proposal, suggesting that it was a back-door way of raising revenues without meeting requirements for a tax hike. Democrats responded by saying they were only expanding the authority of local officials.
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