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Angelides hits Davis sales-tax plan "The only way this budget battle moves forward is if the people are more engaged in the choices at hand," Angelides, a likely Democratic candidate for governor in 2006, said in a lunchtime meeting with The Bee Capitol Bureau. In a revised budget plan last week, Davis proposed paying off $10.7 billion of the state's record-setting deficit with a half-cent sales tax increase. The tax would be imposed for about five years. The Democratic governor also called for tobacco and income tax increases to fund a shift of state responsibilities to the counties. Although California is still seen as a solid investment in financial markets, the treasurer said, Davis' deficit financing proposal is testing the limits of the state's ability to borrow. The state's short-term borrowing would total about $17.5 billion. "I do think we're getting to the point where we're beginning to stretch our credibility in the markets and we'd better be darn careful," he said. Lenders are less concerned with the underlying health of the state's economy, he said, than with the political pitfalls of the two-thirds budget approval requirement and the fiscal restrictions imposed by various initiatives. "What you don't want to go down is a road where the lenders see you consistently unable to come to any decisions," he said. "People who lend on our debt care about one thing -- will there be a disruption in our payment?" In that context, he said, a petition drive to recall Davis, who was re-elected to a second term in November, would only make matters worse. "It would be sad if it goes that way because I think it would contribute to a banana republic sense of California," he said. Angelides said he didn't want to lend credibility to the recall effort by talking about whether he would join the race to replace Davis. But he did not rule out the possibility. Republicans have declared repeatedly that they will not cast any votes for a budget that depends on tax increases. Because California's spending plan must win two-thirds majorities in both houses, six Republicans in the Assembly and two in the Senate would have to join majority Democrats to pass it. Angelides said that Democrats should aggressively make the case to the public that higher taxes would avoid devastating reversals in education and other public investments and keep California's economy in the vanguard. "Those are things that I think resonate with the people of the state," he said. After years of building momentum for improving schools, he said, the idea of cutting education now is "wrongheaded" and "the ultimate case of being penny-wise and pound-foolish." Republicans have argued that tax increases would hobble a fragile economic recovery. But Angelides faulted his fellow Democrats for not arguing that the spending cuts espoused by Republicans would have a more immediate and devastating effect. "This has been one thing that's been very frustrating," he said. "I don't hear any Democrats rebutting this nonsense Republicans put out that tax increases are going to hurt the economy." Among the options for increasing revenues, he said, was scrapping the manufacturers' investment credit, which reduces taxes for companies that invest in equipment. Angelides said the credit has not proved its worth in attracting jobs. Other possibilities are imposing sales tax on some services, increasing the corporate tax rate, and removing commercial property from the strict limits on property tax rates set by Proposition 13.
"There are many options to do
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