After months of being pummeled by Gov. Arnold Schwarzenegger over his plan to raise taxes, Democratic gubernatorial nominee Phil Angelides called Wednesday for $1.4 billion in tax cuts, mainly for middle-income Californians.
The tax breaks were the centerpiece of a broad fiscal agenda that Angelides laid out Wednesday in an effort to blunt the Republican governor's attacks and reinvigorate his campaign, which has struggled to recover from a vicious Democratic primary. Aides said the proposal would form the campaign's foundation for the final three months of the race.
But Angelides, the state treasurer, stood by his call for more than $5 billion in tax increases on corporations and Californians who make more than $250,000 a year. That plan, along with an array of tax-hike proposals that Angelides embraced over the years but later abandoned, has drawn ferocious criticism from Schwarzenegger's reelection campaign.
Angelides announced his tax-cut proposal in speeches to labor supporters in Hollywood and, a few hours later, San Francisco.
"We can put our tax code back on the side of middle-class families and small businesses," Angelides told more than 100 applauding supporters in Hollywood.
Angelides proposed $788 million in tax cuts for families earning up to $100,000 a year, $526 million in small-business tax reductions, and $88 million in property tax relief and rent subsidies for poor, disabled and elderly people.
The tax hikes on corporations and the wealthy, along with "efficiencies and government reform," would produce enough to close the state's budget gap and leave nearly $500 million in reserve by June 2008, according to his campaign.
Angelides used his twin speeches to try to sharpen contrasts between himself and Schwarzenegger, calling the Nov. 7 election "a choice between far different values and far different visions for the future."
Angelides portrayed himself as a champion of hardworking families faced with soaring costs for healthcare, gasoline and higher education. He renewed his call for $1.5 billion in new spending. The bulk of the money would go to education, including a rollback in college fee hikes that took effect under Schwarzenegger and wider access to health coverage for children.
"We can invest in education knowing that it builds our common future like no special-interest giveaway ever can," he said.
Angelides depicted the governor as a captive of campaign donors, saying that he had broken his vow during the recall campaign to clean up state government.
He said Schwarzenegger had harmed the middle class while protecting corporations and the wealthy. California, he said, needs "a governor who will restore the promise of middle-class opportunity, instead of selling it off to the highest special-interest bidder."
"Gov. Schwarzenegger, shame on you," Angelides said. "You know full well that you're defending the perks and privileges of powerful corporations and the wealthiest Californians, who've gotten the biggest tax breaks in modern history, while I'm going to cut taxes for 4.5 million families and seniors."
Minutes after Angelides concluded his tax-cut speech in Hollywood, Schwarzenegger held a news conference in Sacramento with more than a dozen anti-tax supporters. The governor has made his refusal to raise taxes the focus of his drive for a second term.
He said his Democratic challenger wanted to raise taxes by $18 billion, which Angelides denies. Schwarzenegger said he and his allies trust "the people" to spend public money, while his opponents trust government.
"We want to expand the economy; they want to expand the government," Schwarzenegger said.
The governor did not address Angelides' accusation that his administration had hit the middle class with $2.5 billion in tax increases disguised as fee hikes, mainly at public colleges and universities.
Asked how he defines a tax, Schwarzenegger deferred to Jon Coupal, president of the Howard Jarvis Taxpayers Assn., who said: "Taxes are broadly imposed on everybody, and without acknowledging where the money goes."
In a written statement, Schwarzenegger campaign spokesman Matt David said Angelides had "no credibility talking about tax breaks considering he has spent his entire career supporting tax increases."
"It's laughable that 83 days out from the election, Angelides is pandering on his central campaign promise of higher taxes," David said.
Schwarzenegger's stand on taxes is crucial to his effort to maintain his standing among conservatives, his biggest bloc of supporters. His campaign's focus on taxes is also aimed at the moderates who swing California elections, and fits the long-standing Republican pattern of attacking Democrats by tapping public opposition to tax increases.
For Angelides, the proposal to cut taxes could carry benefits beyond fending off Schwarzenegger's attacks, said Gary Jacobson, a professor of political science at UC San Diego.
"It's a fairly risky move to make, but he has to do something bold just to get attention," Jacobson said.
In the general election contest, Angelides has struggled to gain his footing. Polls last month found Schwarzenegger well ahead.
The Democrat has been slow to raise the money he will need for extensive television advertising after Labor Day. And he has been fighting efforts by Schwarzenegger's campaign to cement an impression among political insiders that Angelides is bound to lose.
Angelides plans to promote his tax-cut proposal today in San Bernardino, Riverside and Anaheim.
"We're on the offensive now," the candidate told a Burbank supporter, Gerry Aho, after the speech in Hollywood.
Later in San Francisco, U.S. Sen. Dianne Feinstein (D-Calif.) joined Angelides for a rerun of the speech before another union crowd.
Times staff writer Robert Salladay contributed to this report. *
Annual tax cuts: $1.4 billion $788 million: Income tax cuts for families earning up to $100,000*
$526 million: Small-business tax cut
$88 million: Property tax relief and rent subsidies for low-income elderly and disabled
Annual tax increases: $5.1 billion $3.1 billion: Income tax increase for individuals with more than $250,000 in taxable income and couples with more than $500,000 in taxable income**
$2 billion: Corporate tax "loopholes" to be closed upon recommendation of a commission
* These cuts would come in two forms. First, an earned-income tax credit of up to $660 would go to working families making up to $46,000 a year. Second, the state's dependent credit for income taxes would rise from $283 to $483 for taxpayers earning up to $100,000 a year, cutting taxes for 1.5 million families.
** Tax increase would expire after three years.
Angelides gubernatorial campaign