Brown to Unveil New Taxes, Cuts

New budget will close $16 billion gap, governor says.

By Sharon Bernstein
|  Monday, May 14, 2012  |  Updated 3:12 PM PDT
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California Gov. Jerry Brown proposed more than $8 billion in cuts Monday to close a widening state budget deficit that he blamed partly on a slower-than-expected economic recovery.

California Gov. Jerry Brown proposed more than $8 billion in cuts Monday to close a widening state budget deficit that he blamed partly on a slower-than-expected economic recovery.

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California Gov. Jerry Brown on Monday is expected to propose closing the state’s large budget gap with a raft of spending cuts and new taxes on the state’s highest earners.

Updated Article: Brown Proposes $8.3 Billion in Cuts.

Faced with a deficit of $16 billion – considerably higher than the $9.2 billion originally forecast – Brown is expected to suggest cuts in health and human services, employee compensation and other areas,  spokesman H.D. Palmer told NBC4.

Palmer said the governor would propose adding three new tax brackets for the wealthiest Californians, which would raise their assessments by as much as 3%. Right now, Palmer said, the highest earners in the state pay 9.3% of their income in taxes. Brown’s new plan – which must be approved by voters – would create three new marginal tax rates: 10.3%, 11.3% and 12.3%.

If the increases are not approved, he said, the cuts would be deeper.

Assembly Minority Leader Connie Conway criticized the governor's tax proposal, saying that revenues are still higher than last year and that the governor should be "leaving overburdened taxpayers alone."

"The bigger problem is that the imaginary money the majority party counted on in last year's budget never materialized," she said in a statement, "and they have refused to cut big big government."

Brown said Saturday that he would also propose a new sales tax of 0.25%, or a quarter of a percent. That's less than the half-percent that he proposed in January, he said.

On Monday, Brown will release a new version of the state’s budget that will detail both the state’s anticipated revenue for the year, as well as the administration’s spending proposals.

It’s a mid-year budget revision that has become a regular political ritual in California, as the state fine-tunes its expectations of income and spending.

Palmer, who has worked on financial policy issues and communications for both Brown and former Gov. Arnold Schwarzenegger, said the state’s finances have worsened considerably because of a big drop in tax revenues during the fourth quarter of 2011.

A leading cause, he said, was a reduction in the amount of capital gains taxes that Californians paid on the sale of stock and other investments.

“Estimated tax payments were down by a double digit amount,” Palmer said. “That’s an anomaly that hasn’t happened for 20 years.”

On Saturday, Brown addressed Californians in a YouTube video, criticizing prior legislative fixes as “gimmicky” and putting part of the blame for the state’s budget hole on federal regulators  and state judges, who blocked some of his proposed cuts.

“We’re still recovering from the worst recession since the 1930s,” Brown said in the video. “Tax receipts are coming in lower than expected and the federal government and the courts have blocked us from making billions in necessary budget reductions. This means that we will have to go much further and make cuts far greater than I asked for at the beginning of the year.”

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