(05-05) 04:00 PDT Sacramento --

Counties and school districts could have broad authority to propose their own personal income tax and other taxes that have previously been the sole responsibility of the state, under a bill approved by a Senate committee Wednesday.

The bill by state Senate President Pro Tem Darrell Steinberg, D-Sacramento, would allow counties and school districts to seek voter approval of additional income and sales taxes along with excise taxes on alcohol, cigarettes, oil drilling, sweetened beverages and medical marijuana, all in an effort to shore up local services that have been slashed because of state budget cuts. Cities, however, are not included in the bill.

The legislation would also allow counties and school districts to ask voters to approve increases in the vehicle license fee. All proposed tax increases would need voter approval to pass.

"I recognize the controversy inherent in this measure, but I want to say in conclusion I think it is good public policy," Steinberg told the Senate Governance and Finance Committee, which passed the proposal on a 6-2 party-line vote.

He added, "I have one laser-like focus, and that is to make sure we do everything possible to avoid unacceptable cuts to schools and public safety."

Confusing patchwork?

But Republicans on the committee and a number of business organizations spoke out against the bill, arguing that it would create a confusing patchwork of tax rates for both businesses and individuals, as the more than 1,000 school districts and 58 counties in California would have new individual taxing powers.

They said it would create great confusion in the state's tax code, and representatives from the Franchise Tax Board and the Board of Equalization - which administers tax collection in California - said they would have to make significant, and probably expensive, changes in their computer systems to comply if the bill were to become law.

Opponents also raised concerns that such tax authority would lead to a balkanization of services for Californians, with wealthier counties and school districts offering much higher levels of support than others.

"Legislators should be responsible for what the state looks like as a whole," said Gina Rodriquez, vice president of the California Taxpayers Association, an influential pro-business organization that opposes the measure. She added that the bill would pit "county against county, school district against school district."

In previous years, lawmakers have proposed bills to allow local entities to implement some of these taxes, but never have they all been included in one measure. Those bills never became law.

Under the proposal, school districts and counties could increase some taxes only to a certain level, such as 1 percent of taxable income, $1 per pack of cigarettes and 5 cents for every 5 ounces of wine. A current limit of 2 percent on the local sales tax would be removed, meaning there would be no limit, and the bill specifies no limit on a medical marijuana tax.

According to analysis by the committee staff, if all 58 counties were to impose the maximum levels on personal income taxes, the vehicle license fee, oil drilling, alcohol and cigarettes, it would generate $13 billion in new revenue.

Voter approval

School districts or county boards of supervisors could by majority votes place tax measures in front of voters. If the tax would go for a specific purpose, like schools or transportation, the measure would require approval by two-thirds of voters.

However, if the taxes were for non-specified general purposes, they could be passed by a simple majority of voters.

Sen. Bob Huff, R-Diamond Bar (Los Angeles County), the vice chairman of the committee, called the proposal a "paradigm shift" in tax law and said he was perplexed by the scope of the proposal.

"There's so many moving parts to this thing it's hard to even craft a question," he told Steinberg during the hearing.

Also complicating the proposal is that the Franchise Tax Board, which collects personal income tax, does not track where people live in the state.

Brian Putler, legislative director for the tax board, told the committee that the board's computer system is not designed to track in which county or school district taxpayers reside. Some Californians have more than one residence in more than one county or school district, but the bill does not yet specify how residency would be determined.

The bill now heads to the Senate Appropriations Committee for consideration.