Here’s a new one. The state legislature in California is floating the idea of swapping a reduction in the state sales tax (already the nation’s highest) for a one percentage point increase in the state income tax (aspiring to overtake Hawaii and Oregon to become the nation’s highest) in order to net a few billion dollars in revenues, one small step toward closing the gaping $19 billion budget shortfall. This story in Bloomberg has the details:

The increase would affect all taxpayers except those in the highest tax bracket, according to Senate President Darrell Steinberg, a Democrat. To make it more palatable to voters, California’s highest-in-the-nation sales tax would be cut simultaneously by 2.5 percentage points. Unlike sales levies, state income taxes are deductible from federal returns. The swap would add as much as $3 billion to the general fund.

“The idea is to increase some taxes that are already federally deductible and to allow taxpayers to take advantage of that while lowering some taxes that are not federally deductible, while the state general fund can gain $2 billion to $3 billion for education and other vital services,” Steinberg said in an interview yesterday.

California’s legislative leaders have been meeting for the past three weeks to discuss ways to close the deficit for the fiscal year that began July 1. Controller John Chiang said he may issue IOUs to creditors in August if a budget isn’t passed soon.

It’s going to be a long, hot summer in Sacramento, likely to include more IOUs…