S. African Sanctions Prompt GOP to Oppose Unitary Tax Repeal Bill

Unitary tax repeal legislation was dealt a serious blow Thursday when Republicans refused to vote for the bill after Democrats added an amendment that would require multinational corporations to end investments in South Africa in return for tax relief.

“If the amendment stays in the bill, we don’t have a bill,” said Assemblyman William P. Baker (R-Danville), vice chairman of the Ways and Means Committee, who joined other GOP committee members in refusing to vote for the amended measure.

Democrats voted 10-4 in favor of the amended bill, which will be brought up for a another vote Tuesday.

The proposed legislation, drafted by Sen. Alfred E. Alquist (D-San Jose), would give multinational corporations an estimated $258-million tax break by rolling back the state’s controversial unitary method of taxing corporate profits.

Under the unitary system, the state taxes corporations on the basis of worldwide income, rather than just profits generated within California or the United States.

Corporations claim that the tax is unfair and have won legislative support for the repeal bill by arguing that it hurts state efforts to attract new business investment.

The bill passed the Senate on a 24-12 vote in June.

The amendment was proposed by Assemblywoman Maxine Waters (D-Los Angeles), who has been among the most vocal critics in the Legislature of South Africa’s government-sanctioned policy of racial discrimination against blacks. She led efforts last June to attach a similar provision to the $34.8-billion state budget. Republican Gov. George Deukmejian vetoed the budget provision, aimed at stopping state pension fund investments in companies that do business with South Africa.

Waters said after the hearing that she did not intend to back down from her anti-apartheid stand.

Her amendment will say that before a corporation is eligible to receive tax relief under the Alquist bill the company’s board of directors must adopt a policy promising to make no further investments in South Africa.

Republicans said the Alquist bill was intended to improve California’s image as a place to do business, and the amendment would send the wrong signals. They predicted very few corporations would adopt such a policy.

Alquist left the hearing quickly after the amended bill was approved and was not available for comment.

An aide to the senator said, “The bill can’t pass this way. Sen. Alquist has a real hard time with this.”