Tax Break for Non-Itemizers Is Proposed

Taxpayers who do not itemize their deductions would receive a $50 break on their state income taxes next year under a revised “tax simplification” measure unveiled Thursday by two key lawmakers.

Advancing their proposal on the eve of tonight’s income tax filing deadline, Assemblymen Elihu Harris (D-Oakland) and Dennis Brown (R-Signal Hill) announced the introduction of legislation to boost the standard deductions claimed by all taxpayers who do not itemize. The measure, however, could cost the state $250 million yearly.

Harris and Brown, who were members of a conference committee that drafted last year’s bill conforming California income taxes to the revised federal tax codes, said their proposal would benefit nearly 5 million taxpayers who have too few deductions to itemize.

“We need to continue building a fair system,” Harris said, “one in which low-income individuals, renters and the elderly receive the full benefits.”

Under the precarious balancing act that resulted in the conformity bill, the standard deductions allowed by the state were tied to the federal standard deduction for the 1987 tax year only.

Standard Deductions

On forms for the 1988 tax year, the federal standard deduction will rise to $3,000 for single filers, $5,000 for those who file jointly and $4,400 for single heads of household. But unless state law is changed, California taxpayers will be limited to this year’s standard deduction of $1,965 for single returns and $3,930 for joint filers and single heads of household.

By conforming the state standard deduction to the federal system, those who do not itemize would save an average of $50 yearly, the lawmakers said. That also would enable an additional 440,000 state taxpayers to abandon the more complicated task of itemizing deductions.

So far, neither lawmaker has sought support from the Legislature’s leadership but their proposal has won early endorsements from a number of union groups as well as the citizen political action group Common Cause.

But they also concede that their bill is likely to be sidetracked unless they can find a way to make up the $250 million that the state would be expected to lose.

Both lawmakers said they believe that tax collections will be higher than expected, which might make up for the bulk of the $250-million potential loss. If not, other current tax breaks would have to be curtailed, they said, a process that could open the door to powerful special interests looking for their own tax breaks.

“I think it will be a real test of the Legislature’s will and resolve,” Harris said.