PROVIDENCE – The House Finance Committee has approved a $7.76 billion 2010 state budget proposal that would increase the capital gains tax and the gas tax, scrap the governor’s plans to phase out the corporate tax and assumes a $67.9 million cut in state personnel and operating costs.

With the 16 to 1 Finance Committee vote – House Minority Leader Robert Watson, R-East Greenwich, dissented – it is expected that the budget plan will be voted on by the full House next week. It also will need Senate approval and Gov. Donald L. Carcieri’s signature before it is enacted. Carcieri also could choose to either not sign the budget or veto it.

His spokeswoman said before the vote that the governor would have no comment until he had a chance to examine the House Finance proposal.

State leaders are hiking taxes and cutting costs because they are faced with difficult decisions. By the end of the legislative session, they must close an estimated $586.6 million shortfall for next fiscal year, which starts July 1. The projected deficit is $125.3 million larger than the $461.3 million shortfall that was assumed when the governor submitted his budget plan on March 10.

The Finance Committee’s plan to make up that extra shortage would tax the sale of stocks, bonds and similar investments as ordinary income if those investments are held for longer than five years, just as it currently taxes short-term capital gains.

The long-term rate, which currently stands at 1.67 percent, had been reduced in recent years at the behest of the business community, which argued that a lower capital gains tax would help the state’s economic development efforts.

Taxing capital gains as ordinary income would generate $23.6 million in fiscal 2010, according to numbers released by House Finance Chairman Steven M. Costantino, D-Providence.

“When you look at the menu of taxes that could have been hit – sales tax, the flat tax – this was seen as less onerous,” Costantino said in a press briefing before today’s Finance Committee hearing on the proposal.

While the House Finance tax-and-spending package did not contain increases in the sales tax and the flat income tax – moves that would have surely drawn a chorus of protest from business leaders – the package did reject Carcieri’s plan to phase out the corporate tax as a way of attracting new business to the state. The phase out would have cost the state $14.5 million in tax revenue in 2010, state officials have estimated.

In addition, the new proposal features a 2 cent increase on the gasoline tax, which would generate additional revenue of $4.5 million. The tax currently stands at 31 cents a gallon.

And another tax that was revised from Carcieri’s budget proposal: The House Finance plan would raise the threshold for the estate tax from $675,000 to $850,000, not the $1 million the governor had sought. That change would create an additional $700,000 in taxes.

The proposal also alters Carcieri’s proposal to dramatically change the state pension plan, rejecting Carcieri’s recommendation that the state do away with 3 percent cost-of-living increase for retirees.

The Finance Committee plan would increase the minimum retirement age, which would be based on how many years an individual had already put into the system. House officials said any retired state employee or any employee who has worked 28 years as of Sept. 30 will still received the 3 percent cost-of-living adjustment upon retirement. Any worker with less than 28 years as of Oct. 1 will receive an annual adjustment based on the consumer price index, not to exceed 3 percent, upon retirement.

Costantino said those changes would save the state $45.4 million in fiscal 2010, but that was down from the $64.3 million that Carcieri said his pension proposal would have saved. This was one of two areas in which there was a significant difference from the governor’s plan. The House Finance budget added back $18.3 million in debt service, from a savings of $42.7 million to one of $24.4 million. In addition, the legislator’s proposal holds back $28 million from the amount that Carcieri had planned to repay the budget stabilization fund.

At the same time, the House Finance budget plan agreed with Carcieri’s recommendation that the state cut $55 million in general revenue sharing to the cities and towns. Costantino said education aid to local communities would remain about level under the proposal, although he acknowledged that about $6.3 million in teacher professional development funds had been taken out.

Also, the House Finance plan would remove about $1.7 million in the governor’s budget recommendation set aside for new charter schools and Cumberland’s Mayoral Academy.

There were some changes to funding for several human services programs, including RIte Care, which had $1.3 million restored that had been cut from Carcieri’s budget proposal.

Other business-related Finance Committee proposals included a recommendation that the Office of the Health Insurance Commissioner Christopher F. Koller be eliminated.

Costantino said the duties of that office, which is a division of the R.I. Department of Business Regulation, could be performed by other divisions in the DBR.

The proposal also recommended that the state’s appropriation to the R.I. Economic Development Corporation be reduced by $2.6 million, and that its contribution to the Slater Technology Fund be reduced by $1 million. Also, the budget plan assumes the DBR will generate $1.6 million in additional fees.

In one of the biggest revisions from the governor’s budget proposal submitted in March, the House Finance plan would require state officials to reduce personnel and operating costs by 5 percent for the full year in every department, plus an additional 2.5 percent in the final half of fiscal 2010.

It’s estimated that such cuts would save $67.9 million next fiscal year.

When asked during the press brief where the savings would come from, Michael O’Keefe, the House fiscal adviser, said, “Good management.”

An earlier version of this article incorrectly said Gov. Donald L. Carcieri vetoed last year’s budget, and the newer version of the story contains a clarification of the pension system changes.