California Proposes 1.25 Percent Levy On Property Insurance

Sacramento, CA (AHN) - To address a state budget deficit of P14 billion for 2008, California Governor Arnold Schwarzenegger is proposing a variety of measures including a 1.25 percent levy on real property insurance policies. The state's insurance industry is said to agree to the proposal to collect $12.50 for every $1,000 insurance premiums purchased in the state. He announced the measure at his fifth State of the State address on Wednesday.

The measure is expected to raise $125 million, to fund a larger state fire fighting unit including more crew, helicopters, fire engines and satellite tracking devices. A few years ago, San Diego voters often hit by bushfires, rejected a proposal to imposed higher local hotel taxes to improve the state's firefighting capability.

The levy, Schwarzenegger said, will cost California taxpayers only $10 a year per capita but it is expected to save the state government and insurance policy holders a lot of money by lesser properties damaged by blazes.

The governor said, "The economics of this makes sense... Consumers and the state will end up saving money."

Residents opposed to an additional burden called it a tax. But the name of a levy can spell the difference between a proposal and public approval. A fee requires only congressional approval by a simple majority. A tax needs two-thirds vote by the legislature and Republican support.

Lew Uhler, president of the National Tax Limitation Committee, commented, "I don't know how you avoid calling it a tax... The ability of government officials to figure out new ways to tax us is limitless, no matter what their nomenclature."

A few months ago, Schwarzenegger increased California drivers' registration by up to $11 to establish a research fund for alternative fuel development.

At the same time the governor also proposed to amend the state constitution that will use as a yardstick 10-year economic growth rates to determine budget cuts or higher spending. If the state revenues increase higher than the 10-year average economic growth rate, the extra income will be placed into a rainy day fund to be touched when state revenues goes below the average.