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Top Calif. Democrat Gov. Candidate Seeks New Taxes


August 19, 2003

SAN FRANCISCO (Reuters) - California's Lt. Gov. Cruz Bustamante, the leading Democrat seeking to replace Gov. Gray Davis, proposed on Tuesday raising taxes by $8 billion to help the state's ailing finances -- while Davis readied a major defense of himself and his administration.

Running in defiance of fellow Democrat Davis in the unprecedented Oct. 7 recall election on the governor's future, Bustamante vowed to send his proposal to voters as a special initiative should the legislature reject the ideas.

Davis, who has so far done little campaigning to save his job, prepared to give a major speech in Los Angeles at 5 p.m. PDT (8 p.m. EDT) on Tuesday at which he would "speak from the heart" to voters to defend his handling of the state's energy crisis and its budget deficit.

Aides told the Los Angeles Times that Davis would try to paint the recall as part of an effort by Republicans to undermine democratic processes and would probably cite the impeachment of President Clinton and the 2000 Florida presidential voting fracas as examples.

Bustamante is running neck and neck in polls with Republican actor Arnold Schwarzenegger to lead the 135 replacement candidates on the recall ballot. The first ballot question asks if voters want to remove Davis from office, the second lists replacement candidates.

"The simple truth is we all got into this mess together," Bustamante said on the front lawn of his suburban Sacramento home. "Everybody has to pay something."

"We've tried all the easy ways and there aren't any left, and we can't borrow any more money."

Davis is facing the first recall in the state's history largely because of public unhappiness over the emergence of a record $38 billion deficit that delayed the passage of a state budget this year. Putting state finances in order will be the key issue facing Davis or any replacement in the coming months.

Mexican-American Bustamante proposed raising state taxes for the richest citizens, closing corporate property tax loopholes, a crackdown on fraud in the state's medical program, and higher cigarette and alcohol taxes.

He also seeks to slash another $4 billion in spending from a budget that already carries an $8 billion deficit going into the next fiscal year.

ACTOR TO HIT AIRWAVES

The plan comes a day before Schwarzenegger meets his top economic advisers, including billionaire Warren Buffett and former Secretary of State George Shultz, to shape his economic platform.

The Austrian-born actor has kept a low profile for the past 10 days but will launch his first television commercials on Wednesday as his campaigning efforts start in earnest.

Although the burly, short Bustamante is seen as lacking the charisma of Schwarzenegger, he is seeking to rally the state's Democratic majority to his side. Polls show Schwarzenegger dividing potential support with several other Republican candidates, including conservatives Bill Simon, a businessman who lost against Davis last November, and State Sen. Tom McClintock.

Both Simon and McClintock have vowed that they will not raise taxes or fees. Schwarzenegger has not clarified his position on taxes.

Bustamante received several endorsements on Monday, including one from the 140,000-member California State Employees Association. Meanwhile, candidates are awaiting word from the courts on a possible delay in the balloting. Two federal judges are hearing separate challenges to the Oct. 7 recall on the grounds that, in one case, six state counties have antiquated voting machines, and, in the other, that one county did not follow proper election procedures.

In Los Angeles on Monday, a federal judge put off ruling on whether to postpone the recall because of the voting machines question. (Additional reporting by Jenny O'Mara)