Taxpayers can breathe a sigh of relief, after that look of puzzlement, over the budget deal that state lawmakers apparently struck with Governor Schwarzenegger tonight.

The 10% increase in personal income tax withholding (likened to a mugging by my colleague Judy Dugan) that was part of the budget approved this week by lawmakers was nixed after Arnold threatened to veto a plan that ‘kicked the can down the street’ with gimmicks.

There’s no way to argue that all gimmicks have left the building, but taxpayers have been spared the one that would strike directly at their pocketbooks.

The deal also apparently calls for increased penalties on corporations who underpay their taxes, though this doesn’t sound like it fixes the corporate tax giveaway that also made waves when the deal was announced.