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Gov. Schwarzanegger Says Raising Taxes is Needed to Stop the Bleeding

From oil to alcohol, Governor Arnold Schwarzenegger has proposed billions in tax increases on goods and services. He thinks the money will help to fill an eleven-billion-dollar hole in the California

Gov. Schwarzanegger Says Raising Taxes is Needed to Stop the Bleeding

From oil to alcohol, Governor Arnold Schwarzenegger has proposed billions in tax increases on goods and services. He thinks the money will help to fill an eleven-billion-dollar hole in the California state budget. And as Marianne Russ reports from Sacramento, he's also pushing for billions in cuts.

Governor Schwarzenegger has called a special session of the legislature to address the ballooning deficit. He says the stock market dip and housing slump leave the state with few choices.

Schwarzenegger: We have a dramatic situation here and it take dramatic solution and immediate action. We must stop the bleeding.

His solution involves a laundry list of tax hikes. The centerpiece is a bump in the sales tax of one-and-a-half percent - for three years. He also wants to permanently expand the sales tax to services like car repairs, sporting events and amusement parks.

Other hikes include a nickel a drink on alcohol, and an oil severance tax of nearly 10 percent. He also wants to add 12 bucks to the vehicle registration fee.

His plan also calls for four-and-a-half billion in cuts - mostly to education and social programs. And he's included cost-cutting measures like furloughing state workers one day a month and eliminating two state holidays.