Final Approval of $1.1-Billion Rebate Voted

The Senate voted overwhelming final passage Friday for legislation to send Californians $1.1 billion worth of tax rebate checks starting Nov. 1.

Gov. George Deukmejian praised the compromise he fashioned with legislative leaders as a “great victory” for taxpayers. Democrats, meanwhile, although they folded their earlier opposition and voted for the rebate, promised an all-out campaign next year to weaken the 1979 voter-approved law that sowed the seeds for the taxpayer refund.

The rebate plan was contained in two bills sent to the governor on identical 36-1 votes.

Beginning Nov. 1, the state will start mailing out about 12 million rebate checks to Californians who filed tax returns on 1986 income, whether they paid a tax or not.

The legislation provides for rebates equal to 15% of a filer’s tax liability up to a maximum of $118 for a single person and $236 for couples. However, everybody who filed a return would get back at least $32 for single people and $64 for couples.

Subject to U.S. Taxation

However, the state income tax rebate would be subject to taxation by the federal government.

It is the fourth state tax rebate since Ronald Reagan was governor in 1969 and the biggest. The compromise was made possible by Deukmejian’s agreeing to a Democratic demand to support a separate bill restoring $87 million for big-city schools that Deukmejian had vetoed from the state budget.

Sponsoring the rebate legislation were Sen. Henry J. Mello (D-Watsonville) and Assemblyman Gary A. Condit (D-Ceres). The school aid bill, which provides $31 million for the Los Angeles Unified School District, was sponsored by Sen. Robert G. Beverly (R-Manhattan Beach).

The school measure, approved by the Assembly late Thursday, cleared the Senate on a 38-0 vote Friday and was sent to the governor.

Deukmejian, who last June proposed that the $1.1 billion be returned to income taxpayers because they contributed most to the surplus, declared that the “taxpayers of this state have won a great victory and it is clear that the people’s will really does have an impact in Sacramento.”

‘Kept Faith With Voters’

By approving the rebate, he said, the Legislature “kept faith with the voters” who enacted the 1979 law--known as Proposition 4 and sponsored by anti-tax crusader Paul Gann. Essentially, the law requires revenues collected in excess of government appropriation limitations to be returned to taxpayers. The limits are based on a formula involving growth of population and inflation.

Democratic legislators, however, had steadfastly fought an income tax rebate, arguing that it is folly to return the funds when state residents are contending with problems such as deteriorating highways, hard-pressed public education, inadequate health care for the poor and a growing need for shelter for the homeless.

At the same time, they noted, California is increasingly relying on borrowed billions from bond sales to finance programs such as highways that traditionally have been paid for by user taxes. Bond funds are exempt from the spending limitation law, which was activated unexpectedly for the first time this year.

Senate Democrats, in particular, opposed making the rebate by mailed check, fearing, among other things, that receipt of a check from the government would erode potential voter enthusiasm to relax the so-called Gann Limit law.

On the other hand, Republicans insisted upon a check, viewing it as politically attractive to voters who presumably would remember the rebate and vote for the GOP at election time.

1971 Check Rebate

Of the four previous rebates, only one involved a check. That occurred in 1971 when Reagan was chief executive and resulted in a $241-million excess caused by the imposition of payroll withholding.

During debate on Friday, Senate leader David A. Roberti (D-Los Angeles), who earlier favored asking the voters in 1988 whether they wanted a cash rebate or the money to be spent by government, conceded that Democrats had run out of “strategies” to divert the surplus into schools or consume the excess by reducing sales taxes temporarily.

But Roberti vowed that Democrats will get behind a ballot initiative, such as the one proposed by Supt. of Public Instruction Bill Honig, to soften the spending limit restrictions and make more money available for education and other programs.

Roberti said Democratic colleagues were “willing to go along with the rebate . . . so we can concentrate hard on pushing an initiative next year. The Democrats view this as the opening salvo. We will prevail at the ballot box.”

But Sen. John Seymour (R-Anaheim) accused Democrats of “weeping and wailing,” asserting that “there are always more needs (for money). Thank God we have a Gann Limit.”

REBATES BY INCOME GROUP Under an agreement between the Legislature and Gov. Deukmejian, taxpayers would begin receiving rebate checks after Nov. 1 equal, in most cases, to 15% of the amount of state taxes they paid in 1986. All taxpayers would receive at least $32, with a maximum of $118 for single filers and $236 for married couples filing jointly. Here is a breakdown of average rebates by income group: Single Taxpayers

Adjusted Average Rebate Gross Income Amount Under $10,000 $32 $10,000-$20,000 $48 $20,000-$30,000 $105 $30,000-$40,000 $113 $40,000-$50,000 $116 $50,000-$100,000 $116 Over $100,000 $118

Married Filing Jointly

Adjusted Average Rebate Gross Income Amount Under $10,000 $64 $10,000-$20,000 $64 $20,000-$30,000 $71 $30,000-$40,000 $113 $40,000-$50,000 $169 $50,000-$100,000 $218 Over $100,000 $232