SACRAMENTO (AP) _ Incoming state Assembly Speaker Karen Bass on Tuesday said one way to solve California’s continual budget mess is to revamp the state’s tax code, possibly raising income taxes on the wealthy, levying sales taxes on services and closing tax loopholes.

In an interview with The Associated Press, the Los Angeles Democrat said she wants a bipartisan panel to examine the code and recommend ways to change it.

“The state of California is in a crisis,” Bass said. “I want to set up a commission outside of the Legislature that will look at more long-term solutions and evaluate whether the tax structure we have now makes sense given that it was devised in the 1930s when we had an entirely different economy.”

Gov. Arnold Schwarzenegger has estimated that California’s budget gap could approach $20 billion through June 2009. Bass, who takes over next week from current Assembly Speaker Fabian Nunez, said she expects the figure to be between $12 billion to $15 billion.

The shortfall has created friction between lawmakers who want spending cuts and those who want a combination of cuts and tax increases.

Bass said the panel she hopes to establish would evaluate whether lawmakers should raise some taxes and identify the tax loopholes that help the economy in the long run. It would not address the deficit for the fiscal year starting in July, she said.

“I don’t want to bring together a commission and say, ‘Here’s my prescription for what I want you to do,’” Bass said. “I want them to determine it.”

California’s tax codes are filled with hundreds of breaks that add up to an estimated $50 billion a year for businesses and individuals, according to the Senate Revenue and Taxation Committee.

Tax breaks benefit corporations, parents, senior citizens, farmers, ranchers, small business investors, homeowners, low-income renters, ministers, magazines, credit unions, the blind and even independent oil producers, to name some.

Earlier this year, Republicans blocked a bill to close a tax loophole generally seen as benefiting the wealthy. It allows California residents to avoid paying sales tax on yachts, private planes and recreational vehicles if they keep their new purchase out of state for three months.

Democrats often suggest raising income taxes on the wealthy, something that was temporarily enacted by the Legislature and Gov. Pete Wilson in 1991 to balance the state deficit. It expired in 1996.

Schwarzenegger spokesman Aaron McLear said the governor is open to tax reform.

“The governor absolutely supports looking at our overall tax structure and is willing to discuss a commission,” McLear said. “But it’s really important to note that’s not a substitute for reforming our broken budget system.”

Schwarzenegger has proposed a spending cap and creating a $2.8 billion reserve to guard against economic reversals. He also has said he is opposed to a tax increase to solve this year’s budget gap.

Bass envisions a bipartisan commission that would make recommendations to the Legislature within a year. Members would include professors, tax attorneys, economists and other experts.

“We know 12 months from now we’re going to be back at the same place,” Bass said.

Copyright 2008 The Associated Press.