California Budget Fix Onerous to Taxpayers

On Wednesday, the state sales tax rose by 1 cent on the dollar. When city and county levies are added, sales taxes throughout California now range between 8.25% and 10.25%, according to the state Board of Equalization.

The fee to license all vehicles will nearly double in May. And by the end of the year, state government will be taking more from people's paychecks than ever before, boosting the personal income tax rate by 0.25%. Tax filers also will be able to claim less on a dependent care credit -- to the federal level of $99 instead of $300.

Some of the new taxes would last until 2013 if voters approve the spending cap measure in May.

The California Budget Project estimates the tax hikes will disproportionately hurt working-class earners. A couple with $40,000 in taxable income will see a 12.9% increase in taxes, while a couple making $750,000 would get a 2.9% increase.

"It has a larger impact at the bottom," said the group's executive director, Jean Ross.

The Schwarzenegger administration said it would not have agreed to the budget deal without measures it said were needed to stimulate California's economy, which included the corporate tax breaks and credit for buyers of new homes.

Schwarzenegger said it would have been irresponsible to raise taxes without also cutting spending and taking steps to boost the economy and create jobs. He and other Republicans argued that corporate tax credits encourage business, a point critics say is hard to prove.