Governor Urges Fast Action on Erasing State Unitary Tax Law

Gov. George Deukmejian on Thursday urged the Assembly to approve legislation that would relieve foreign corporations of paying millions of dollars yearly under California’s unitary method of collecting business taxes, saying that only quick action will stave off a federal effort to repeal state unitary tax laws.

“I think it would be wise to bring it up immediately and let the Assembly vote on it,” Deukmejian told reporters after a luncheon speech.

U.S. Sen. Pete Wilson (R-Calif.) on Wednesday introduced a bill on behalf of the Reagan Administration that would strike down the unitary method of taxation used by six states including California. Under the unitary method, corporations are taxed on their worldwide earnings instead of only their U.S. profits.

Pressure Applied

Reagan has been pressuring the six states to revise their tax laws because of threats that some foreign nations might retaliate against U.S. firms if the practice continues.

A measure that would provide annual tax breaks of about $250 million to some of the world’s largest businesses passed the state Senate but deadlocked in the Assembly last September when Democrats included anti-South Africa apartheid provisions in the bill.

Deukmejian said he spoke to U.S. Treasury Secretary James A. Baker III after the Assembly failed to act and was warned that the Reagan Administration would take steps to force the states to end unitary taxation.

“I think the (Reagan) Administration in making this proposal did so with the hope that it would be an action that at least for the time being would satisfy our trading partner nations to the point where they would not take some retaliatory action against United States companies,” Deukmejian said.

The Republican governor said he is not angry that Wilson agreed to carry the measure. He predicted that if the Assembly quickly passes the unitary bill when the Legislature reconvenes next month, “I strongly believe the Administration would drop its most recent proposal.”