Debra J. Saunders

On Tuesday, Assembly Speaker John Perez of Los Angeles and Senate President Pro Tem Darrell Steinberg of Sacramento presented the Democratic plan. Thus ended the speaker's dubious call for Democrats to "hold firm," not negotiate and propose more gimmicky borrowing to fuel more spending the state cannot afford.

Schwarzenegger spokesman Aaron McLear observed, "It's nice that they're finally on the same page, but the speaker has wasted the last two months campaigning for what his own party has called an illegal borrowing scheme."

The new Steinberg/Perez "tax swap" plan presents a certain logic. The Democratic leadership proposes to raise income taxes for most Californians by 1 percent, increase the vehicle license fee to 1.65 percent from 1.15 percent, but cut the state sales tax from 6 percent to 3.5 percent. The idea, they say, is to increase taxes that are deductible on federal tax returns -- thus getting Washington to absorb what Sacramento has funded -- while reducing the tax burden at the cash register. The average tax filer making $60,000 per year would pay $473 more in state income tax, $118 in car fees, but $677 less in sales tax.

The plan also includes an annual $1.2 billion oil severance tax that likely would be passed on to consumers and would spend nearly $4 billion more than Schwarzenegger has proposed.

Allow me to salute the Dems for not going the soak-the-rich route. The top 1 percent of California taxpayers already pays almost half of the state's income taxes. As Steinberg noted, the income from raising taxes on those high earners is too volatile.

But it's hard to imagine the Democratic caucus going along with a proposal that, the Republicans playfully have argued, places a disproportionate burden on the poor.

Only 37 percent of Californians itemize on their tax returns. The Dems' plan would raise taxes for 57 percent of filers by 2012, Department of Finance spokesman H.D. Palmer told the San Francisco Chronicle's Wyatt Buchanan. Hence, Republicans declared the proposal "dead on arrival" because it's a tax hike.

To recap: Sacramento faces a $19 billion shortfall, the budget is seven weeks overdue and the only thing party leaders can agree on is that the other party is responsible for the budget impasse.

But do not argue that Sacramento is good for nothing. If AB1998 passes, you won't have to hear the question "Paper or plastic?"

Debra J. Saunders

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