California Governor Arnold Schwarzenegger unveiled a plan today for a steep sales tax increase and deep cuts in services to wipe out a budget shortfall that is expected to swell to more than $24 billion by the middle of 2010.

The linchpin of the plan is the sales tax increase of 1 1/2 cents on the dollar, which could raise more than $10 billion through fiscal 2009-10. Such a tax is likely to face resistance from Republicans, who blocked a smaller increase proposed by the governor last summer and have vowed to continue to do so.

Schwarzenegger also proposed extending the sales tax to appliance and furniture repair, vehicle repair, golf fees, veterinarian services, amusement parks and sporting events. He proposed a 9.9% tax on the extraction of oil from California ground, the expansion of sales tax to some services, and a 5-cent-per-drink tax on alcohol. His plan also includes a $12 increase in annual vehicle registration fees.

The governor also wants a number of significant spending reductions, including cuts of $2.5 billion from schools and community colleges. And he proposed eliminating dental insurance for poor adults on the state’s MediCal program and lowering subsidies to the aged, blind and disabled. California’s welfare subsidies would also be reduced.

Sales tax in Los Angeles would shoot up to 10.25% if the governor’s newest plan were to be approved. That would include a half-cent sales tax hike that Los Angeles voters apparently passed on Tuesday to fund transit projects. The statewide sales tax rate is 7.25%.

The governor said “drastic measures” are needed because the state has lost so much money in tax revenue since the Legislature passed the state budget in September.

(Source: LA Times)