Governor Puts on Pressure for Fast Tax Rebate

Gov. George Deukmejian hinted Saturday that he may support a ballot initiative or a lawsuit if the Legislature fails to act swiftly on rebating to income taxpayers $1.1 billion in surplus revenue.

“There is no cause whatsoever for delay,” Deukmejian said in his regular weekly statewide radio address.

Clearly turning up the pressure, Deukmejian declared: “If legislative progress on my rebate proposal does not become evident soon, then concerned taxpayers will no doubt consider options such as an initiative or a taxpayer’s lawsuit.”

Aides noted that it was the first time in a formal speech where the Republican governor mentioned both a ballot initiative and a lawsuit in the same breath as potential alternatives if the Legislature fails to act.

Various initiatives for the 1988 election year ballot have been proposed, including at least one by Assembly Republicans that would rebate the surplus along the lines Deukmejian has proposed. Sentiment among Democrats, meanwhile, seems to be building for a sales tax rebate that would benefit more Californians than an income tax cut.

U.S. Tax Bite

For the 1987 tax year, Deukmejian would return up to $150 for a single income taxpayer and a maximum $300 for a couple filing jointly. Critics maintain, however, that for the typical state income taxpayer this would amount to only $75 and that because of recent changes in the U.S. Tax Code about $38 million would go to the federal government, which considers such a rebate as income.

The governor has not said whether he would prefer return of the funds to income taxpayers in the form of cash or an income tax credit. His rebate bill was killed by the Democratic-dominated Senate Revenue and Taxation Committee earlier, but another bill could easily be found, in his words, “to enact this proposal now.”

To counter critics, chiefly state Supt. of Public Instruction Bill Honig and Democrats in the Legislature who maintain the excess funds should go to public education, health care and highways, Deukmejian has proposed that income taxpayers could refuse the rebate and donate it for other government programs.

Deukmejian press secretary Kevin Brett, amplifying on the speech, said the governor is not endorsing any proposed rebate initiative “at this time,” but if majority Democrats in the Legislature become “intransigent, it is not beyond possibility for the governor to join in an initiative effort.”

So far a taxpayer’s lawsuit has not been filed to force the issue, although there has been talk of doing so. “That’s clearly an option,” Brett said, adding that “no decision has been made” on either alternative.

State government coffers became awash in unanticipated revenue last winter and this spring and for the first time ran smack into a governmental spending limit approved by the voters as Proposition 4 in 1979. The law, basically, held that excess revenue that could not be legally spent for certain programs exempt from the limit must be rebated to taxpayers. It gave the governor and Legislature two years to devise a program to do so.

Honig, who originally campaigned hard to spend at least $700 million of the surplus on schools, now asserts that voters next June should be asked whether they want to pocket the rebate or “invest” it in schools, constructing and repairing highways, aiding financially hard-pressed local services and for health care, such as AIDS research and education.

“He is saying, ‘Let’s give the money back and be proud of it,’ ” Honig said Saturday of Deukmejian’s stance. “That’s one philosophy. The other is that we have some crying investment needs. Our first priority is let people vote on it.”

Honig said Deukmejian and the Legislature should enact legislation to do so and if they fail, such a ballot initiative could be put before the voters at the June primary.

Sales Tax Proposal

Meantime, Assembly Speaker Willie Brown (D-San Francisco) has proposed that the state sales tax be lifted temporarily during the Christmas shopping month of December and the $1.1 billion be rebated in that fashion. Because more people pay sales taxes than income taxes, the rebate would be more evenly distributed, he said.

“The Speaker believes that some kind of a solution will be arrived at during this session,” press secretary Susan Jetton said. “We have got to decide how the money is going to be rebated. (Deukmejian) does not have a monopoly on how the money is going to be returned.”

“There is no sentiment in the Legislature for the governor’s inequitable proposal because any rebate must benefit all taxpayers and not simply those wealthy few,” declared Senate President Pro Tem David A. Roberti (D-Los Angeles).

He pointed out that people who paid sales taxes or vehicle fees “also contributed to the excess revenue (and) therefore, they also must benefit from any rebate.” Roberti said if an election were held, “all voters must be involved, not just income taxpayers.”

In stressing his demand for an early rebate, Deukmejian asserted there was no reason to delay, noting that if a taxpayer refused to pay a tax bill in a timely fashion “you would not be treated very kindly” by tax officials.

“I believe government should play by the same rules that are required of citizens and taxpayers,” he said, without mentioning the provision of Proposition 4 that gives him and the Legislature two years to decide how to return the surplus revenue.

In a related development, Brown took a page from Deukmejian’s public relations handbook and made his own three-minute radio address, assailing the governor’s budget cuts and promising legislation to restore certain programs. He said they could be financed from the governor’s jealously guarded $1-billion reserve for unexpected emergencies.