Unitary Tax Issue Puts Deukmejian, Business at Odds

Gov. George Deukmejian, in a rare break with California business as he heads into a reelection campaign next year, said Wednesday he still supports proposed unitary tax repeal legislation even though state corporate executives contend it would hurt them by providing major tax breaks for foreign competitors.

“I doubt very seriously that their fortunes are going to rise or fall based upon the amount of state taxes that they pay,” said Deukmejian of the California corporations.

At a wide-ranging news conference, the governor brushed aside complaints by California corporate executives who maintain that tax breaks for overseas corporations would allow foreign competitors to undercut the prices of domestic goods.

On another issue, the Republican chief executive discounted findings of a recent statewide voter opinion poll showing that Los Angeles Mayor Tom Bradley, a potential Democratic opponent in next year’s gubernatorial election, was ahead of him in popularity.

Cites His Own Ratings

Deukmejian pointed to his own high ratings in the poll by Mervyn Field--56% of those surveyed rated his performance as governor as good to excellent--and pointed out that he trailed Bradley in public opinion polls when the two opposed each other for the governorship in 1982. Deukmejian won by less than 100,000 votes.

The governor said that in previous surveys, including Field polls, “I’ve always been behind, I’ve always been the underdog.” But Deukmejian noted that he came out a winner in election contests.

Deukmejian said Bradley has benefitted by the fact that “he hasn’t had to take a position on statewide issues, controversial issues.

“People throughout the state have not, let’s say, been in a position where they have either observed his views or his policy,” Deukmejian continued. “He hasn’t been the subject of some of the comment, some of the criticism and so on, of the hard questioning that I have received.”

The governor, noting that the poll was taken long in advance of the election, said such polls are good for only “about 15 minutes.”

Deukmejian’s comments on unitary tax repeal probably will not play well with some corporate executives, who in the past have been among his strongest political supporters.

On Tuesday, a delegation of leading corporate executives complained personally to Assembly Speaker Willie Brown (D-San Francisco) in a private 90-minute meeting that they did not think they were getting a fair shake in the unitary legislation, which is being carried by Sen. Alfred E. Alquist (D-San Jose).

Indicates Support

Deukmejian said he is studying recent amendments to the Alquist bill but indicated he favors the measure.

Deukmejian said the legislation would “encourage more investment and the creation of more jobs in California.”

The bill would give multinational corporations the option of paying corporate taxes on the basis of worldwide income or only on income generated within the United States.

The companies are now required to include worldwide income, which they claim is unfair. Foreign corporations and governments have been bitterly fighting the tax for years, claiming the state is overreaching by taxing worldwide business operations.

Foreign governments are threatening retaliatory action and individual companies say they will consider states that have no unitary tax, such as Florida and Oregon, in deciding future plant location or expansion.

Estimated Savings

Figures supplied by the Franchise Tax Board and legislative tax consultants indicate the bill would save multinational corporations an estimated $258 million in taxes, with most of the benefits going to domestic corporations.

But the U.S. companies dispute the estimates and say that foreign corporations would reap the largest benefits under the bill, giving them a major competitive advantage.

The domestic companies want an amendment to the bill that would exempt from state taxes the earnings of their own foreign subsidiaries, but so far they have run into strong resistance. Deukmejian said in the news conference that he opposes the amendment.