The legislative budget conference committee approved the Democrats' controversial tax plan today on a majority vote, although some lawmakers acknowledged that the analysis is incomplete.
Democrats officially unveiled their plan Tuesday to raise taxes on income and vehicles but cut sales taxes. They asserted that the proposal would save taxpayers overall, but Republicans and Gov. Arnold Schwarzenegger's Department of Finance provided separate analysis showing that the plan would increase taxes on the middle class taxpayers.
Committee Chairwoman Denise Moreno Ducheny, D-San Diego, asked lawmakers to adopt the plan so the committee could establish the level of funding for schools -- a level determined by how much the state receives in revenues. Democrats embraced the plan in committee, although Sen. Mark Leno, D-San Francisco, said he welcomed any new data challenging the Democrats' contention that the proposal was a tax saver.
Approving the plan in conference committee is a relatively early step in the budget process. Ultimately, legislative leaders and Schwarzenegger will negotiate the proposal in or out of the budget.
Michael Cohen, deputy legislative analyst with the nonpartisan Legislative Analyst's Office, said he could not yet conclude whether the plan would result in higher or lower taxes for Californians. He said it was clear that some households would fare better and some worse, but his office is still reviewing the proposal.
Cohen said the plan would make California's tax system more volatile, but he was not sure how much more so. The problem, he said, was that the personal income tax is a more unpredictable revenue source than sales taxes.
But Cohen said taking greater advantage of taxes that are deductible on federal tax returns, like those on income and vehicles, was a step in the right direction from a policy standpoint.
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