Staff and Wire reports
Created: 05/25/2010 04:18:36 PM PDT

SACRAMENTO – Inland Valley state Sen. Bob Dutton this week blasted a Democrat plan to raise taxes by nearly $5 billion, largely by extending temporary taxes and delaying corporate tax breaks for two years.

Democrats in the Senate on Monday countered Gov. Arnold Schwarzenegger’s proposed budget cuts with a plan to raise taxes by nearly $5 billion.

During a Senate subcommittee hearing, Democrats said they want to delay the start of corporate tax credits demanded by Schwarzenegger and Republicans last year to secure enough budget votes. Their plan also would extend by two years the temporary increases in the income tax and vehicle license fee that were approved last year.

Dutton, R-Rancho Cucamonga, said extending temporary tax increases and delaying corporate tax credits would run counter to the state’s attempt to jump-start job growth and get people spending.

The Senate’s incoming minority leader said taxpayers would feel slighted if the Legislature reneged on past promises.

“Now you’re telling them, `Well, sorry, we didn’t mean it,”‘ Dutton said, referring to the tax increases that were approved last year with firm end dates.

Assemblyman Curt Hagman, R-Chino Hills, said he also opposed the Democrats’ budget proposals.

“Overregulation and overtaxation has helped get us to this point and the way to get out is to deregulate and make businesses more competitive,” Hagman said. “With taxes and overregulation, California can’t compete with Nevada or Texas as people go there to do business for a lot less.”

Democrats proposed raising the tax on alcohol but would allow a temporary 1 cent increase in the state sales tax to expire at the end of the year.

Schwarzenegger proposed no tax increases in his latest plan to close California’s projected $19 billion budget deficit, relying mostly on spending cuts.

Sen. Denise Ducheny, D-San Diego, chairwoman of the Senate Budget Committee, said nearly all state programs have been asked to keep spending flat, if not below what they were receiving two or three years ago.

“And it seems to me in that context, if we’re asking programs to remain flat-funded, we ought to be able to ask ourselves as taxpayers to be flat-funded,” Ducheny said.

Ducheny said Republicans demanded corporate tax credits as the state faced a looming cash crisis. The minority party often can extract concessions during budget negotiations because of California’s two-thirds voting threshold for passing spending plans and tax increases.

“It was a leveraged deal that had no real relation to policy,” she said. “It shouldn’t have been done.”

Some of the tax breaks would allow businesses to reduce their tax burden by applying net operating losses from prior years. Multistate corporations would be able to choose the way they calculate corporate taxes, allowing them to use a formula referred to as “single sales factor.”

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