Opening door to new taxes

Faced with a faltering economy and a worsening budget deficit, California Gov. Arnold Schwarzenegger for the first time in his five-year tenure opened the door Wednesday to a potential tax increase in his proposed 2008-09 budget. Harrison Sheppard in the Daily News.

Schwarzenegger said he will first ask lawmakers and voters to authorize the state to borrow up to $15 billion against future state Lottery earnings over three years. But if that fails on the November ballot, it would trigger an automatic one-cent increase in the statewide sales tax for at least three years.

The proposal contrasts with promises Schwarzenegger has made from the beginning of his term to refuse to raise taxes, while also ending borrowing for normal government operations.