Governor Hotly Disputes Claim He Boosted Taxes

Gov. George Deukmejian, who has consistently maintained that he has not approved any general tax increase, angrily branded as “irresponsible” Tuesday a contention by the Legislature’s budget adviser that Californians are paying substantially more in state taxes since Deukmejian was elected.

According to nonpartisan Legislative Analyst William G. Hamm, state taxpayers will pay about $1.2 billion more between 1983 and 1987, including increased motor vehicle license fees, sales taxes on video rentals and, in some cases, higher property taxes.

The governor called Hamm’s analysis “entirely incorrect” but conceded at a press conference that the state has raised an additional $160 million a year by closing “several tax loopholes.”

“You go out and ask the average person out there whether we’ve increased their taxes,” Deukmejian told reporters. “I think you will find that they would agree that we have not.”

As he has traveled up and down the state, Deukmejian has often said that he has balanced the state’s budget without raising taxes. This is sure to be one of the central themes in his expected campaign for reelection.

“We are no longer a top leading tax state in the nation. The legislative analyst doesn’t talk about that when he’s throwing out these irresponsible statements.”

Hamm’s office compiled figures showing that Californians will pay an additional $2.4 billion to the state as a result of measures approved by the Legislature and signed by the governor. This money would be paid between July 1, 1983, and June 30, 1987, the period in which Deukmejian’s four state budgets are implemented.

Hamm said Tuesday that some parts of the $2.4-billion increase should not be labeled as tax hikes, such as a $620-million increase in income tax revenue attributable to formulas pegged to the U.S. consumer price index, another $410 million in income taxes generated by legislation that made state tax laws conform to federal statutes, and $223 million resulting from legislation that required employers to speed up payment of money withheld from employee paychecks.

However, the fiscal analyst said Deukmejian has approved a number of changes that he does consider to be tax increases. Hamm estimates that over the 1983-87 period these changes will cost taxpayers:

- $830 million in increased fees for motor vehicles that are less than 10 years old.

- $411 million from a law eliminating delays in the reassessment of homes after they are purchased.

- $143 million from an extension of the sales tax to video tape rentals and vending machine sales.

- $210 million from a change in tax laws that reduced deductions for medical care.

- $14 million from a tax on some horse-racing bets and elimination of the income tax deduction for gasoline costs.

These increases are offset by a change in the solar and energy tax credits that it is estimated will save taxpayers $429 million, Hamm said.

That leaves a total estimated tax increase of about $1.2 billion, Hamm said.

“Don’t take my word for it,” he said. “Go ask the people who are paying higher property taxes whether they are paying higher taxes or not. Go ask the people who own those vehicles whether they are paying higher taxes.”

Deukmejian took exception with Hamm’s analysis, which was first reported by the Sacramento Bee.

“The legislative analyst’s statement is entirely incorrect,” the governor said. “In fact, if you want to go one step further, as a result of indexing (the income tax), as a result of other changes in the law, people in California are actually paying less percentage-wise, based on their personal income.”

The governor noted that he has vetoed $2.8 billion in increased spending proposed by the Legislature. And he said there has been no increase in the basic rate for the state’s major sources of revenue: the sales tax, the income tax and the business tax.

“We did close several tax loopholes, but the amount of money from those tax loopholes coming into the state amounts to approximately $160 million in a year,” he said. “That’s one half of 1% of the total amount of revenue that the state receives.”