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By Jim Christie

SAN FRANCISCO, Jan 6 (Reuters) - Republican California Governor Arnold Schwarzenegger has vetoed a budget plan pressed by Democrats who control the state legislature, an aide said on Tuesday evening.

Schwarzenegger's veto came after Republican lawmakers joined anti-tax activists in a lawsuit to block the plan.

"He has vetoed," said spokesman Aaron McLear.

Democrats passed their plan last month on a majority vote and forwarded it to Schwarzenegger late on Tuesday despite his threat of a veto amid continuing talks to potentially arrive at an alternative plan.

Schwarzenegger agrees with Democrats that the state's swelling budget shortfall must be filled in part with tax increases but he is holding out for deeper spending cuts than they proposed and for changes to state regulations he says will speed construction projects to create jobs.

By contrast, the lawsuit filed in state court is squarely aimed at the Democrats' proposed tax increases. It contends the Democrats' $18 billion plan would undermine California's landmark Proposition 13, a voter-approved change to the state Constitution that limits property tax increases and requires any plan to increase taxes to receive the approval of at least two-thirds of the legislature.

The lawsuit said the Democrats' plan is invalidated by Proposition 13, approved by voters in 1978 and credited with sparking anti-tax sentiment in other states and assisting Ronald Reagan's election as U.S. president two years later.