Schwarzenegger Floats Idea of 1 Percent Sales Tax Hike to Balance Budget

The State Capitol was buzzing Tuesday with word that Governor Schwarzenegger wants to hike the state sales tax. The plan would increase the tax by one cent on every dollar. KPCC's Julie Small says it's an effort to shave down California's $15 billion budget deficit, and get a budget passed.

Julie Small: The governor's proposal to increase sales tax for at least a few years would net California $6 billion a year. He hasn't yet confirmed that he supports that plan. All year long, he's said he's against any new taxes.

But staffers for legislative leaders say Schwarzenegger floated the idea in a closed door session Sunday night. The Democratic leader of the State Senate, Don Perata, welcomed the gesture.

Don Perata: I'm glad the governor has come around to saying publicly what we've known all along: We have to have a tax in order to correct the problem that we're in right now. So I say it's a start.

Small: A start that could stall.

Perata: Let's be clear, he doesn't have any support in his own party yet for this, and unless he can get Republicans to agree with his point of view, we could be here for an extended period of time.

Small: Given Republican reaction to a sales tax hike, budget talks will likely drag on. Nearly all of the Republicans have pledged to oppose any new tax. They say they're sticking to that, even if the governor gets the trade-off he's asked for.

Schwarzenegger's support for a sales tax increase hinges on a getting a "rainy day" fund to help California weather tough economic times. He also wants a spending cap – although Democrats say they're wary of any plan that would force cuts in programs they say Californians want and need.

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