Governor’s Tax Break for Farmers Gets Final OK

The Senate unanimously voted final passage Monday for an election-year proposal by Gov. George Deukmejian to provide a state income tax break to California’s economically distressed farmers.

The Senate sent the bill to the governor for his signature on a 34-0 vote.

Deukmejian, despite twice vetoing similar legislation, has incorporated the tax cut proposal into his “Rural Renaissance” program.

A Deukmejian spokesman said the governor could sign the bill as early as today, the state and federal tax filing deadline for millions of Californians.

Deukmejian’s deputy press secretary, Kevin Brett, said the governor’s change of heart came about because the current version of the bill, by Sen. Henry J. Mello (D-Watsonville), “is much tighter” than previous proposals, meaning it will not cost the state treasury as much in lost taxes.

Estimates by the state Franchise Tax Board are that the bill will give farmers a $6-million tax break in 1986, going up to $12 million in 1988 and increasing annually after that until 1992, the last year the tax reduction will be allowed.

Under the legislation, people who lose money in agriculture could carry their losses forward into subsequent tax years, which would allow them to reduce their taxable income as it applies to California taxes during profitable years.

The farmers would be limited to a maximum deduction of $50,000 in net operating losses during any given tax year. A maximum of $250,000 in cumulative claims would be allowed.

The bill is designed to assist small- and moderate-size operations. Supporters say it was written in a way that generally will exclude large corporate-type farmers.

It is backed by a broad range of citrus, dairy, farming, and ranching interests.

Mello said the legislation is almost identical to two bills vetoed earlier by Deukmejian.

The senator said he believes the governor was pressured by “some real tough letters” he has received from farmers and cattlemen who were “surprised” that he had vetoed the earlier bills.