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It’s not often that former Gov. Gray Davis makes news, but in a low-key appearance with Erin Burnett on CNBC’s “Street Signs” Friday, California’s recalled chief executive made several observations worth noting on taxes and the governor’s race.

Asked by Burnett – who seemed fixated on blaming the initiative process for all that ails the state – Davis pointed squarely to the 2/3 vote requirement to pass the state budget and California’s dependence on income taxes as the culprits.

“Fifty percent of our income tax comes from the top one percent (of taxpayers) and they pay us a lot of money when the market is doing well and real estate is doing well, neither of which are happening right now. So that’s a very volatile tax,” Davis said.

“But the sales tax is very predictable and I think you’ll see Governor Schwarzenegger’s tax commission come back and recommend that the sales tax be lowered and widened. Meaning that law firms, accounting firms — any service — when you go get your car repaired — all that will be subject to a sales tax. And I think that will be a much more dependable that will even out the ups and downs we experience.”

Mark those words, Calbuzzers – lower the sales tax rate and widen its application. Don’t be surprised if Arnold’s Parsky Commission recommends a similar change, linked to something like a small reduction of the capital gains tax – the combination aimed at increasing and stabilizing tax revenues.

Since it was Erin Burnett and a business show, Davis was also asked if he thought former eBay CEO Meg Whitman would make a good governor.

Davis: (pause) “Uh, she may be. I know her. She’s a good person. Outsiders have not had a great track record in winning in California or governing that effectively. People like to say it’s like running a business but if it was, government would run more efficiently. But I think people tend to change and after a Republican governor I think they’ll be looking for change, so I think Democrats have a better chance in 2010.”

So says Senior Statesman GGD.