LOS ANGELES, Dec. 1 (Xinhua) -- As the U.S. auto market marches toward its worst year in decades and dealers close in droves, state and local governments across the country are preparing for serious belt-tightening.

    Sales of new and used cars, as well as parts and service, are the single largest source of sales tax revenue for almost every state, county and local government, but those figures were down substantially these days, according to a Los Angeles Times report Monday.

    In California, where more motor vehicles are sold than in any other state, nearly 193 million dollars of sales taxes came from the automotive and transportation sector in the second quarter, about 30 million dollars down from that in the same period last year.

    The reduced auto sales tax revenue this year contributed to the huge shortfall in the state's budget, prompting Governor Arnold Schwarzenegger to propose a sales tax hike and spending cuts.

    Nearly 2 million fewer cars and trucks were sold in the United States through October this year compared with last year, resulting in at least 2 billion dollars in lost sales taxes, according to the report.

    The big three U.S. automakers, which have been working to get government financial aid, are under extreme pressure as their cars are selling even more slowing than the industry as a whole, forcing them to dramatically reduce lending to dealers and car buyers, thus pushing dealers out of business.

    Nearly 700 of the 20,000 new car dealers in the country have closed this year, the highest rate since 1990 when 1,550 dealers shuttered, according to Paul Taylor, chief economist for the National Automobile Dealers Association.