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Dems support gas
tax move, budget debate continues
California's Democrats unveiled
their budget plan this month, and, similar to Governor Arnold Schwarzenegger's
proposal, it includes a measure to divert money from transit projects and
programs to the state's general fund by eliminating the existing gasoline sales
tax and replacing it with an increased excise tax. Officials estimate that the
tax swap will save the state $920 million in the coming fiscal year.
Critics contend that the provision is counterproductive, arguing that the
raiding of transit dollars will slow the job creation required to increase
California's tax revenues. Some studies have found that every $1 billion spent
on infrastructure produces $5 billion in economic activity and over 18,000 jobs.
While Democrats and the governor agree on removing the gas sales tax, they
disagree on the extent to which the measure should be applied. The Democrats'
proposal would maintain the sales tax on diesel and allow local governments to
place on the ballot an additional gas fee to help pay for transit programs. By
maintaining the sales tax on diesel, transit agencies will see approximately
$313 million annually in addition to the $400 million they receive from a
separate, pre-existing transportation fund.
Governor Schwarzenegger's plan simply cuts the gas sales tax across the board.
Despite Democrats' attempt to retain some gas tax funding for transit programs,
the agencies will receive substantially less than in previous years if the plan
is approved.
California is facing a $19.9 billion budget deficit for Fiscal Year 2010-2011
and, after two previous round of especially contentious budget debates, many
state legislators say they must make difficult cuts to state expenditures to
balance the budget. Moreover, Sacramento Republicans and the governor have said
that they will not support new general taxes or fees due to the current economic
climate.
Even Democrats are avoiding revenue generating solutions.
"I don't plan to put forward a general tax increase, because I don't think we'll
pass it," Senate Pro Tem Darrell Steinberg said.
New public works
money absent in Senate jobs bill
Frustrating the hopes of infrastructure advocates, the U.S. Senate's jobs
bill, known as the Hiring Incentives to Restore Employment (HIRE) Act, will
contain no new federal dollars for public works projects. After discussions on a
variety of proposals, the body will consider a pared-down package of bills
presented by Senate Majority Leader Harry Reid (D-NV) in the last week of
February.
Senator Reid's $15 billion HIRE plan includes just two public works-related
proposals. Most notably, it extends the federal highway trust fund with an
account of $19.5 billion allocated from the general fund through the end of the
calendar year. The bill will also allocate $2 billion for the Build American
Bonds program.
The bill also includes a variety of tax credits and exemptions for businesses
that hire new employees in 2010.
Senate Republicans are opposing the HIRE bill, labeling it fiscally
irresponsible.
"I want to warn my colleagues not to be distracted by those who call this draft
legislation a 'jobs' bill, because the reality is that this plan doesn't create
more jobs, just more government and more debt," said Senator Judd Gregg (R-NH).
"A perfect example is the highway extension plan, which transfers $47 billion
from the Treasury's General Fund to the Highway Trust Fund over the next 10
years, adding to the nation's debt burden. In 2010 alone, a $19.5 billion
transfer will instantly increase the federal debt by that amount. The Highway
Trust Fund is insolvent, and instead of attempting to fix the problem, this
draft bill would simply kick the can down the road and ask our children to pay
for these transfers, with interest."
The GOP opposition is so strong that there is even discussion of a potential GOP
filibuster when the debate is opened on the Senate floor.
The Senate Democrat caucus, however, has staunchly defended the infrastructure
spending provisions with the backing of construction advocacy groups.
"If this HIRE Act is not passed...we'll see thousands of projects grind to a
halt and thousands of jobs lost," said William Millar, President of the American
Public Transportation Association.
Also drawing the Republicans' ire was the fact that Senator Reid's smaller HIRE
bill undercut the larger bipartisan HIRE proposal crafted by Senator Max Baucus
(D-MT), chairman of the Senate Finance Committee, and the panel's ranking
minority member, Sen. Charles Grassley (R-IA), that came with a $85 billion
price tag over the next ten years.
While HIRE contains no new infrastructure spending, Senator Barbara Boxer (D-CA)
has indicated that if the bill is approved by Congress, the body may take on a
second jobs package that includes more infrastructure spending.
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