by Calculated Risk on 11/06/2008 03:26:00 PM

As the California recession deepens, the state is facing an enormous budget deficit ...

From the LA Times: Schwarzenegger calls for sales tax hike, cuts in services

Gov. Arnold Schwarzenegger unveiled a plan today for a steep sales tax increase, new levies on alcoholic drinks and the oil industry, 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 $10.8 billion through fiscal 2009-10. ...

The governor also wants a number of significant spending reductions, including cuts of $2.5 billion from schools and community colleges.

This proposal would push the LA sales tax rate to 10.25% - Yikes!

Tax increases and budget cuts during a recession usually just make the recession worse. My guess is the next stimulus plan from the U.S. government will include some relief for state and local governments.